On the consistency of central banks´ interest rate forecasts

Jin-Kyu Jung (), Michael Frenkel () and Jan-Christoph Rülke ()
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Jin-Kyu Jung: WHU - Otto Beisheim School of Management
Michael Frenkel: WHU - Otto Beisheim School of Management
Jan-Christoph Rülke: EBS Universitaet fuer Wirtschaft und Recht

Economics Bulletin, 2019, vol. 39, issue 1, 701-716

Abstract: In this paper, we derive internal consistency restrictions on short-term and long-term interest rate forecasts as published by the central banks of the Czech Republic, New Zealand, Norway and Sweden. We find different degrees of forecast consistency across these countries and also document that consistency is more apparent among short-term forecasts compared to long-term forecasts. Our results are robust when taking a more complex lag structure and more consistency restrictions into account. These results offer interesting policy implications as central banks´ interest rate forecasts can be regarded as an important instrument of central bank communication.

Keywords: Central bank communication; forecasts; interest rates; internal consistency (search for similar items in EconPapers)
JEL-codes: E4 E5 (search for similar items in EconPapers)
Date: 2019-03-28
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