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Inflation Reports and Models: How Well Do Central Banks Really Write?
Author:
Mr. Ales Bulir
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Jaromír Hurník null

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Ms. Katerina Smídková null

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Series:
IMF Working Papers
Volume/Issue:
Volume 2014: Issue 091
Language:
English
Publication Date:
29 May 2014
DOI:
https://doi.org/10.5089/9781498387613.001
ISBN:
9781498387613
ISSN:
1018-5941
Pages:
47
Keywords:
WP; inflation factor; inflation report; correlation Between Reported; inflation target; report communication; Inflation targeting; Kalman filter; monetary policy communication; correlation coefficient; inflation expectation; inflation deviation; Inflation; Exchange rates; Communications in revenue administration; Global
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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We offer a novel methodology for assessing the quality of inflation reports. In contrast to the existing literature, which mostly evaluates the formal quality of these reports, we evaluate their economic content by comparing inflation factors reported by the central banks with ex-post model-identified factors. Regarding the former, we use verbal analysis and coding of inflation reports to describe inflation factors communicated by central banks in real time. Regarding the latter, we use reduced-form, new Keynesian models and revised data to approximate the true inflation factors. Positive correlations indicate that the reported inflation factors were similar to the true, model-identified ones and hence mark high-quality inflation reports. Although central bank reports on average identify inflation factors correctly, the degree of forward-looking reporting varies across factors, time, and countries.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund