Interest Rates and the Subjective Probability Distribution of Inflation Forecasts

1988 ◽  
Vol 20 (2) ◽  
pp. 233 ◽  
Author(s):  
Kajal Lahiri ◽  
Christie Teigland ◽  
Mark Zaporowski
Keyword(s):  
Probability Distribution ◽  
Interest Rates ◽  
Subjective Probability ◽  
Inflation Forecasts ◽  
Subjective Probability Distribution

Provision of Public Goods and the MCS Experimental Paradigm

1985 ◽  
Vol 79 (1) ◽  
pp. 148-155 ◽  
Author(s):  
Amnon Rapoport
Keyword(s):  
Probability Distribution ◽  
Public Good ◽  
Subjective Probability ◽  
The Other ◽  
Experimental Paradigm ◽  
Homogeneity Assumption ◽  
Series Of Experiments ◽  
Decision Policies ◽  
Partial Homogeneity ◽  
Subjective Probability Distribution

Van de Kragt, Orbell, and Dawes (1983) reported the results of a series of experiments in which n subjects each receive a monetary endowment and then may choose privately whether to contribute it to a monetary public good; the good is supplied if a prespecified number m < n of contributions or more is made. Decision policies maximizing expected value are derived for this experimental paradigm under three different assumptions about the expectations each individual has about the decisions of the other n – I members: A homogeneity assumption postulating that each other member contributes with fixed probability p, a heterogeneity assumption postulating that the n – I p's are independently selected from a subjective probability distribution, and a partial homogeneity assumption postulating that the n – I members are partitioned into distinct subsets with the same p for all members of each subset. The theoretical and social implications of these assumptions are briefly discussed.

scholarly journals Monetary policy transparency and financial market forecasts in South Africa

2008 ◽  
Vol 2 (1) ◽  
pp. 31-56 ◽  
Author(s):  
Vivek Arora
Keyword(s):  
South Africa ◽  
Monetary Policy ◽  
Interest Rate ◽  
Interest Rates ◽  
Empirical Work ◽  
Economic Benefits ◽  
Cross Sectional ◽  
Inflation Forecasts ◽  
Reserve Bank ◽  
Monetary Policy Transparency

The transparency of monetary policy in South Africa has increased substantially since the end of the 1990s. But little empirical work has been done to examine the economic benefits of the increased transparency. This paper shows that, in recent years, South African private sector forecasters have become better able to forecast interest rates, are less surprised by reserve bank policy announcements, and are less diverse in the cross-sectional variety of their interest rate forecasts. In addition, there is some evidence that the accuracy of inflation forecasts has increased. The improvements in interest rate and inflation forecasts have exceeded those in real output forecasts, suggesting that increases in monetary policy transparency are likely to have played a role.

scholarly journals Monetary Policy Surprises and Inflation Expectation Dispersion

2020 ◽  
Vol 20 (252) ◽  
Author(s):  
Bertrand Gruss ◽  
Sandra Lizarazo ◽  
Francesco Grigoli
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Rational Expectations ◽  
The United States ◽  
Inflation Expectations ◽  
Federal Funds Rate ◽  
Inflation Expectation ◽  
Inflation Forecasts ◽  
Effect Of Monetary Policy ◽  
Information Rigidity

Anchoring of inflation expectations is of paramount importance for central banks’ ability to deliver stable inflation and minimize price dispersion. Relying on daily interest rates and inflation forecasts from major financial institutions in the United States, we calculate monetary policy surprises of individual analysts as the unexpected changes in the federal funds rate before the meetings of the Federal Reserve Board. We then assess the effect of monetary policy surprises on the dispersion of inflation expectations, a proxy for the extent of anchoring, which is based on the same analysts’ inflation projections submit-ted after the Fed meetings. With an identification strategy that hinges on a tight window around the Fed meetings, we find that monetary policy surprises lead to an increase in the dispersion of inflation expectations up to nine months after the policy meeting. We rationalize these results with a partial equilibrium model that features rational expectations and sticky information. When we allow the degree of information rigidity to depend on the realization of firm-specific shocks, the theoretical results are qualitatively consistent and quantitatively close to the empirical evidence.

An Assessment of Bank of England and National Institute Inflation Forecast Uncertainties

2004 ◽  
Vol 189 ◽  
pp. 64-71 ◽  
Author(s):  
Kenneth F. Wallis
Keyword(s):  
Probability Distribution ◽  
Social Research ◽  
Gdp Growth ◽  
Forecast Horizon ◽  
Central Projections ◽  
Amount Of Information ◽  
Density Forecast ◽  
Inflation Forecasts ◽  
Real Gdp ◽  
Bank Of England

In February 1996 the Bank of England and the National Institute of Economic and Social Research significantly increased the amount of information they published about the uncertainty surrounding their central projections of inflation. In effect, and in different ways, they each began to publish a density forecast of inflation, that is, an estimate of the probability distribution of possible outcomes for future inflation. The Bank represented this graphically, as a set of forecast intervals covering 10, 20, 30, …, 90 per cent of the probability distribution, coloured red, of lighter shades for the outer bands. This was done for inflation forecasts up to eight quarters ahead, and since the distribution becomes increasingly dispersed and the intervals ‘fan out’ as the forecast horizon increases, the chart became known as the ‘fan chart’ (or, rather more informally, and noting its red colour, the ‘rivers of blood’). The National Institute represented the distribution as a histogram, in the form of a table reporting the probabilities of inflation falling in various ranges. These intervals, or ‘bins’ of the histogram, have changed from time to time; those used currently are: less than 1.5 per cent, 1.5 to 2.0 per cent, 2.0 to 2.5 per cent, and so on. The forecasts refer to the fourth quarters of the current and following years, and from the beginning have included not only inflation but also real GDP growth. Fan charts for real GDP growth first appeared in the Bank's Inflation Report in November 1997.

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