The Communication Effects on Inflation Forecast Errors: Empirical Evidence from Colombia

Authors

  • Juan Camilo Anzoátegui Zapata Universidad Autónoma Latinoamericana, Colombia
  • Juan Camilo Galvis Ciro Universidad Pontificia Bolivariana, Colombia

DOI:

https://doi.org/10.2298/PAN180101016Z

Keywords:

Central bank communication, Forecast errors, Monetary policy

Abstract

The purpose of this article is to explore the central bank's ability to management inflation forecast errors in Colombia. We present empirical evidence based on the Colombian experience with data from the period of 2008 to 2020. The communication channel selected for analysis is the press releases. The empirical evidence is divided into three steps: (i) regression analysis using an EGARCH model, (ii) use of VAR models, and (iii) variance decomposition analysis. The communications effects are significant for several months and that close to half of the forecast error variance can be explained by innovations in central bank communication. The results obtained allow monetary policymakers to develop more efficient strategies for anchoring expectations and strengthening the central bank credibility. 

Keywords: Central bank communication, Forecast errors, Monetary policy. 

JEL: E52, E58, E63

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Published

2022-06-01

How to Cite

Zapata, J. C. A., & Ciro, J. C. G. (2022). The Communication Effects on Inflation Forecast Errors: Empirical Evidence from Colombia. Panoeconomicus, 69(3), 427–445. https://doi.org/10.2298/PAN180101016Z

Issue

Section

Original scientific paper