Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/154536
Authors: 
Blattner, Tobias
Catenaro, Marco
Ehrmann, Michael
Strauch, Rolf
Turunen, Jarkko
Year of Publication: 
2008
Series/Report no.: 
ECB Occasional Paper 83
Abstract: 
Current best practice in central banking views a high level of monetary policy predictability as desirable. A clear distinction, however, has to be made between short-term and longer-term predictability. While short-term predictability can be narrowly defined as the ability of the public to anticipate monetary policy decisions correctly over short horizons, the broader, ultimately more meaningful concept of longerterm predictability also encompasses the ability of the private sector to understand the monetary policy framework of a central bank, i.e. its objectives and systematic behaviour in reacting to different circumstances and contingencies. In this broader sense, longer-term predictability is also closely related to the credibility of the central bank. This paper reviews the main conceptual issues relating to predictability, both in its short and longer-term dimensions, and discusses how a transparent monetary policy strategy can be – and indeed has been – instrumental in achieving this purpose. This latter aspect is investigated in an overview of the empirical literature, highlighting how financial markets have been increasingly able to correctly anticipate monetary policy decisions for a number of large central banks, including the ECB. The paper also reviews several possible empirical proxies for the less-explored concept of longer-term predictability, which is inherently more diffi cult to measure.
Subjects: 
Predictability
central bank transparency
central bank communication.
JEL: 
E52
E58
E61
Document Type: 
Research Report

Files in This Item:
File
Size
891.07 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.