Inflation Reports and Models: How Well Do Central Banks Really Write?

By Ales Bulir, Jaromír Hurník, Katerina Smídková

May 29, 2014

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Format: Chicago

Ales Bulir, Jaromír Hurník, and Katerina Smídková. Inflation Reports and Models: How Well Do Central Banks Really Write?, (USA: International Monetary Fund, 2014) accessed November 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

We offer a novel methodology for assessing the quality of inflation reports. In contrast to the existing literature, which mostly evaluates the formal quality of these reports, we evaluate their economic content by comparing inflation factors reported by the central banks with ex-post model-identified factors. Regarding the former, we use verbal analysis and coding of inflation reports to describe inflation factors communicated by central banks in real time. Regarding the latter, we use reduced-form, new Keynesian models and revised data to approximate the true inflation factors. Positive correlations indicate that the reported inflation factors were similar to the true, model-identified ones and hence mark high-quality inflation reports. Although central bank reports on average identify inflation factors correctly, the degree of forward-looking reporting varies across factors, time, and countries.

Subject: Banking, Communications in revenue administration, Economic forecasting, Exchange rates, Foreign exchange, Inflation, Inflation targeting, Monetary policy, Prices, Revenue administration

Keywords: Communications in revenue administration, Correlation Between Reported, Correlation coefficient, Exchange rates, Global, Inflation, Inflation deviation, Inflation expectation, Inflation factor, Inflation report, Inflation target, Inflation targeting, Kalman filter, Monetary policy communication, Report communication, WP

Publication Details

Pages:

47
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2014/091
Stock No:

WPIEA2014091
ISBN:

9781498387613
ISSN:

1018-5941

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