Low for how long? Estimating the ECB’s “Extended Period of Time”
Tilman Bletzinger, Volker Wieland 05 September 2013
The ECB has promised to keep interest rates low for an “extended period of time”. In a broad hint to the profession, President Draghi stressed a reasonable forecast of this period could be extracted from a monetary policy reaction function. This column presents one such forecast based on published macro forecasts and a reaction function that fits the ECB’s past behaviour. The result is that ECB interest rates will rise by May 2014 at the latest.
The ECB Governing Council has given hints that it will keep rates low for long (see its May and June statements). On 4 July 2013, the Council went further embracing ‘forward guidance’ (Praet 2013, Woodford 2013).1
“The Governing Council expects the ECB interest rates to remain at present or lower levels for an extended period of time.”
ECB, forecast, monetary rule
A fragile and fickle recovery
Eswar Prasad, Karim Foda 23 April 2012
The world economy is showing scattered signs of improvement but remains fragile according to official forecasts. This column summarises the latest update of the Brookings Institution-FT Tracking Indices for the Global Economic Recovery. It confirms some positive signs but also much to worry about as the world economy continues to meander with no clear sense of direction.
The world economy remains on life support, largely provided by accommodative central banks.
recovery, forecast, TIGER
A century of inflation forecast
Antonello D’Agostino, Paolo Surico 18 April 2011
What does inflation predictability reveal about the conduct of monetary policy? This column examines the ability of money growth and output growth to forecast inflation across a century of US data. It uncovers a robust link between the nature of the monetary regimes and the ability to predict inflation several quarters ahead.
Monetary authorities across the world have always devoted substantial resources to forecasting inflation. The history of monetary policy, however, suggests that the enterprise of predicting changes in the price level has had mixed success over time.
Macroeconomic policy Monetary policy
US, inflation, monetary policy, forecast
Bad forecasters can be good policymakers
Thomas J. Sargent, Martin Ellison 24 November 2009
The Federal Reserve Open Market Committee has been criticised for making forecasts that are inferior to Federal Reserve staff forecasts. This column argues that FOMC forecasts are worst-case scenarios used to inform policy decisions, rather than best estimates of future events. It says that FOMC forecasts are a rational response to doubts about the staff’s model.
The value of the Federal Reserve’s Open Market Committee (FOMC)1 has recently been questioned in a highly provocative paper by two professors at the University of California, Berkeley. The two professors are husband-and-wife team Christina and David Romer, who are amongst the most influential economists in the world today. Christina Romer is Chair of the Council of Economic Advisers in the Obama administration and a co-author of Obama’s plan for recovery, and David Romer is the author of a very popular macroeconomic graduate textbook.
monetary policy, Fed, forecast
Is the UK still in recession? We don’t think so
Domenico Giannone, Lucrezia Reichlin, Saverio Simonelli 23 November 2009
The UK’s early estimate of GDP growth for the third quarter of 2009 still shows negative growth with a reading of -0.4%. This column combines the quarterly releases of GDP with timely survey data to form a “now-cast” of quarterly GDP growth. It says that the UK has likely exited the recession already, estimating positive growth of 0.15%.
Over the last ten days, statistical institutes have published their early estimates of GDP growth for the third quarter of 2009. Both the US and the Eurozone have surprised the market with very positive readings of 0.9% and 0.4% growth, respectively. The UK, on the other hand, still shows negative growth with a reading of -0.4%.
Europe's nations and regions
UK, GDP growth, forecast