Author : Tobias Blattner
Release : 2008
Genre : Banks and banking, Central
Kind : eBook
Book Rating : /5 ( reviews)
Book Synopsis The Predictability of Monetary Policy by : Tobias Blattner
Download or read book The Predictability of Monetary Policy written by Tobias Blattner. This book was released on 2008. Available in PDF, EPUB and Kindle. Book excerpt: Current best practice in central banking viewsa 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 meaning ful concept of longer term 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, high lighting 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.
