Do Central Bank Forecasts Matter for Professional Forecasters?

Abstract

This paper examines to what extent public information provided by the central bank affects the forecasts formulated by professional forecasters. We investigate empirically whether disclosing GDP and inflation forecasts by Narodowy Bank Polski (the central bank of Poland) reduces the disagreement in professional forecasters’ expectations. The results only partially support the hypothesis on the coordinating role of the central bank existing in the literature. The main finding is that by publishing its projection of future GDP growth, the central bank reduces the dispersion of one-year-ahead GDP forecasts. Moreover our study indicates that the role of the central bank in reducing the forecasts dispersion is strengthening over time. We also find using non-linear STR models that the extent to which the projection release affects the dispersion of GDP forecasts varies over the business cycle. By disclosing its own projection the central bank reduces the disagreement among the forecasters the most in the periods when the economy moves from one phase of the business cycle to another. On the contrary, the release of CPI projection by NBP affects neither the cross-sectional dispersion nor the level of forecasts formulated by professional forecasters.