What Has Publishing Inflation Forecasts Accomplished? Central Banks and Their Competitors

Abstract

This chapter explores short-term sources of inflation forecast disagreement in nine advanced economies. Domestic versus global factors among other determinants are considered. The chapter also adapts an idea from the model confidence set approach to obtain a quasi-confidence interval for inflation forecast disagreement. Some forecasters may change their outlook, especially when data are frequently revised (e.g., the output gap). This extension is also considered. Estimates of disagreement are found to be sensitive to the chosen benchmark, and central banks need not always be the benchmark of choice. The range of forecast disagreement can be high even when levels of disagreement are low. There is little evidence that forecasts are strongly coordinated with those of the central bank. Finally, at least over the period considered, which covers the end of the Great Moderation and the global financial crisis, there is consistent evidence that global factors impact forecast disagreement.