Charemza, W;
Díaz, C;
Makarova, S;
(2019)
Quasi ex-ante inflation forecast uncertainty.
International Journal of Forecasting
, 35
(3)
pp. 994-1007.
10.1016/j.ijforecast.2019.03.002.
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Abstract
We propose a measure of the effects of monetary policy based on an analysis of the distribution of the ex-post inflation forecast uncertainty. We argue that the difference between the distributions of the ex-ante and ex-post uncertainties reflects the impact of monetary policy decisions. Using the theoretical background of the New Keynesian model with imperfect information and a monetary policy rule, we derive a proxy for ex-ante inflation uncertainty called quasi ex-ante forecast uncertainty, which is free to a certain extent of the effects of monetary policy decisions. Furthermore, we introduce the compound strength measure of monetary policy, as well as the uncertainty ratio, which approximates the impact of monetary policy on the reduction of the inflation forecast uncertainty. Our empirical results show that the greatest policy effect in reducing the inflation forecast uncertainty occurs for countries which conduct either a well-established or a relatively pure inflation targeting policy.
| Type: | Article |
|---|---|
| Title: | Quasi ex-ante inflation forecast uncertainty |
| Open access status: | An open access version is available from UCL Discovery |
| DOI: | 10.1016/j.ijforecast.2019.03.002 |
| Publisher version: | https://doi.org/10.1016/j.ijforecast.2019.03.002 |
| Language: | English |
| Additional information: | This version is the author accepted manuscript. For information on re-use, please refer to the publisher’s terms and conditions. |
| Keywords: | Macroeconomic forecasting, Monetary policy, Non-normality, Inflation uncertainty, Statistical distributions, Central banking |
| UCL classification: | UCL UCL > Provost and Vice Provost Offices UCL > Provost and Vice Provost Offices > UCL SLASH UCL > Provost and Vice Provost Offices > UCL SLASH > SSEES |
| URI: | https://discovery.ucl.ac.uk/id/eprint/10042597 |
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