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Announcements of Interest Rate Forecasts: Do Policymakers Stick to Them?

By Nikola Mirkov and Gisle James Natvik

Abstract

If central banks value the ex-post accuracy of their forecasts, previously announced interest rate paths might affect the current policy rate. We explore whether this "forecast adherence" has influenced the monetary policies of the Reserve Bank of New Zealand and the Norges Bank, the two central banks with the longest history of publishing interest rate paths. We derive and estimate a policy rule for a central bank that is reluctant to deviate from its forecasts. The rule can nest a variety of interest rate rules. We find that policymakers appear to be constrained by their most recently announced forecasts

Topics: JEL: E43, JEL: E52, JEL: E58, Taylor rule, interest rates, forecasts, adherence
Publisher: Norges Bank
Year: 2013
OAI identifier: oai:norges-bank.brage.unit.no:11250/2496698
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