Central bank projections of inflation and the output gap have more of an influence on private sector forecasts than unemployment projections, a recent working paper, published by the Bank of Canada, has concluded.
In their paper, Monica Jain and Christopher Sutherland use central bank projections and forward guidance from 23 countries dating back to 1990 to analyse the impact of such communication on private sector forecasts.
“We find that central bank projections and forward guidance matter
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