The seminar will be held in the Visitor Centre at 3 pm.
Helge Berger, Michael Ehrmann and Marcel Fratzscher
(Free University Berlin, European Central Bank)
The seminar is based on the following papers:
Geography or Skills: What Explains Fed Watchers's Forecast Accuracy of US
Monetary Policy?
Abstract
The paper shows that there is a substantial degree of heterogeneity in forecast accuracy about US monetary policy decisions among financial market participants. Based on a novel database for 268 professional forecasters since 1999, we find that the average forecast error of FOMC decisions varies around 5 basis points between the best and worst-performing analysts. The paper links this heterogeneity to geography as well as to the skills of analysts. It finds evidence that being located in regions which experience more idiosyncratic economic conditions affects the ability of analysts to anticipate monetary policy. Finally, we show that Fed communication policies have been effective in reducing that part of the heterogeneity of forecast accuracy that resulted from regional economic disparities. However, Fed communication has also heterogeneity-enforcing effects, as the superior forecast accuracy of some analysts is related to their ability to extract more or better information from Fed communication.
Forescasting ECB Monetary Policy
Accuracy is (Still) a Matter of Geography
ECB Working Paper 578, 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. 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.