본문 내용으로 건더뛰기

KDI 경제정보센터

ENG
  • Economic

    Information

    and Education

    Center

최신자료
Building Central Bank Credibility: The Role of Forecast Performance
CEPR
2023.12.06
This paper examines how central banks influence inflation expectations via public signals on inflation, and particularly how their forecast accuracy impacts this effect. We find, using an incentivized experiment, that forecast performance matters. Our main, and novel, finding is the presence of recency bias when subjects evaluate forecast accuracy. This bias, which applies to both short-term and medium-term forecasts, is especially strong after poor forecasting performance. In a New Keynesian model, such biases lead to endogenous forecast credibility which can increase the persistence of inflation. Importantly, narrative communication can partly mitigate the detrimental effect of recent poor forecasting.