Forecasting ECB Monetary Policy: Accuracy is (Still) a Matter of Geography

49 Pages Posted: 17 Jan 2006

See all articles by Michael Ehrmann

Michael Ehrmann

European Central Bank (ECB); Bank of Canada

Marcel Fratzscher

DIW Berlin; Centre for Economic Policy Research (CEPR)

Helge Berger

Free University Berlin - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Multiple version iconThere are 2 versions of this paper

Date Written: January 2006

Abstract

Monetary policy in the euro area is conducted within a multi-country, multicultural, and multi-lingual context involving multiple central banking traditions. How does this heterogeneity affect the ability of economic agents to understand and to anticipate monetary policy by the ECB? Using a database of surveys of professional ECB policy forecasters in 24 countries, we find remarkable differences in forecast accuracy, and show that they are partly related to geography and clustering around informational hubs, as well as to country-specific economic conditions and traditions of independent central banking in the past. In large part this heterogeneity can be traced to differences in forecasting models. While some systematic differences between analysts have been transitional and are indicative of learning, others are more persistent.

Keywords: monetary policy, ECB, forecast, geography, history, heterogeneity, Taylor rule, learning, transmission, survey data, communication

JEL Classification: E52, E58, G14

Suggested Citation

Ehrmann, Michael and Fratzscher, Marcel and Berger, Helge, Forecasting ECB Monetary Policy: Accuracy is (Still) a Matter of Geography (January 2006). ECB Working Paper No. 578, Available at SSRN: https://ssrn.com/abstract=873590

Michael Ehrmann (Contact Author)

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Marcel Fratzscher

DIW Berlin ( email )

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Helge Berger

Free University Berlin - Department of Economics ( email )

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