Credible enough? Forward guidance and perceived National Bank of Poland’s policy rule

Baranowski, Paweł; Gajewski, Paweł

doi:10.1080/13504851.2015.1051651

Cited by 14 publications

(16 citation statements)

References 13 publications

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“…The result provides evidence that the consumers have believed the FG's announcement since inflation expectations of the consumers were in high compliance with the announced 2.5%, despite the publication of more optimistic macroeconomic data and inflation higher than expected in July 2013. As a result, we may conclude that the NBP's FG turned out to be credible not only in the perception of most professional forecasters (Baranowski and Gajewski, 2015) but also in the judgment of consumers. Next, in Figure 1 we compare the behaviour of NBP's reference rate and the policy rates which result from the six remaining Taylor type rules.…”

Section: Resultsmentioning

confidence: 99%

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Forward Guidance, Pros, Cons and Credibility

Ryczkowski¹

2017

Prague Economic Papers

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The goal of the article is to verify the credibility of time contingent Forward Guidance (FG) as well as its possible time-inconsistency based on the rarely addressed example of the National Bank of Poland (NBP). The NBP's FG constitutes a unique case study as this measure in its 'Odyssean' form was not introduced to overcome the limits of further policy rates cuts. It allowed us to verify the FG's credibility and time-inconsistency by applying OLS and GMM estimated contemporaneous and forward looking Taylor type rules with interest smoothing. Our empirical evidence reveals that the annual period of FG in Poland was perceived as a credible promise by consumers. We found that time-consistency could have been an additional factor enhancing the considerable credibility of FG. The satisfying results of the NBP's FG appear to be especially interesting, in particular, when contrasted with the often unfavourable experience with time-contingent FG of prominent central banks. We suppose that to achieve this, the central bank should act with caution and the NBP indeed did so by specifying carefully the short horizon of the commitment to be able to abandon FG when the circumstances change. We also discuss FG by opposing its advantages and the drawbacks indicated in the subject literature.

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Section: Resultsmentioning

confidence: 99%

“…Baranowski, Gajewski (2015) based on micro-data stemming from the National Bank of Poland Survey of Professional Forecasters found evidence in favour of NBP's FG credibility. In the perception of most professional forecasters, the NBP's policy rates were not to be changed before the scheduled deadline.…”

Section: Introductionmentioning

confidence: 99%

Forward Guidance, Pros, Cons and Credibility

Ryczkowski¹

2017

Prague Economic Papers

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“…countries (Czech Republic, Hungary, Poland and Romania), inflation expectations have already been fairly firmly anchored, which speaks in favour of monetary policy credibility. Also, Baranowski and Gajewski (2016) show that the National Bank of Poland put its monetary policy to a credibility test in 2013 and 2014 by launching forward guidance, and this test can be considered as passed. All this most recent evidence would suggest that C.E.E .monetary policies are advanced in the process of credibility-building, although the finding of Franta, Saxa, and Smidkova (2010), who show that backward-looking behaviour may be more important in explaining inflation dynamics in C.E.E.…”

Section: The Cee Perspectivementioning

confidence: 99%

Patterns of regional inflation persistence in a C.E.E. country. The case of Poland

Gajewski

2018

Economic Research-Ekonomska Istraživanja

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This paper investigates patterns of regional inflation persistence in Poland, a representative Central and Eastern European (C.E.E.) country. This study first argues that the C.E.E. perspective is relevant in the context of this study, due to the recent transitions, incomplete processes of forming forward-looking inflation expectations and pronounced spatial inequalities. Using individual and panel regressions on disaggregate data, this study provides evidence of the aggregation bias and marked differences in inflation persistence across product categories. Furthermore, it shows that cross-regional differences in inflation persistence remain, even after controlling for the product category. While this study generally confirms the earlier finding of Vaona and Ascari that more backward regions exhibit higher consumer price index inflation persistence, we also show that the picture is more nuanced at the product category level.

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“…In the latter paper authors shows that risk-sensitive monetary policy rules response stronger to shocks than standard optimal rules. As our model uses only one conventional instrumentshort term interest rate, we abstract from unconditional forward guidance policy that was applied in 2013 (see Baranowski and Gajewski 2016).…”

Section: Model Of the Monetary Transmission Mechanism With Uncertaintymentioning

confidence: 99%

Robust Monetary Policy in a Model of the Polish Economy: Is the Uncertainty Responsible for the Interest Rate Smoothing Effect?

Górajski

2017

Comput Econ

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Optimal monetary policy models in the linear-quadratic framework produce high variability of interest rates, and are hence inconsistent with the data where typically interest rate smoothing is observed. In this paper we determine optimal monetary polices in a VAR model of the Polish economy with parameter uncertainty. We prove that there exists a structure of the multiplicative uncertainty in the optimal linear-quadratic model that explains the central bank's behaviour. Thus proving that parameter uncertainty can be the rationale for "timid" movements in the short-interest rate dynamics. Finally, we show that there is trade off between parameter uncertainty and the interest rate smoothing incentive.

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Credible enough? Forward guidance and perceived National Bank of Poland’s policy rule

Cited by 14 publications

References 13 publications

Forward Guidance, Pros, Cons and Credibility

Forward Guidance, Pros, Cons and Credibility

Patterns of regional inflation persistence in a C.E.E. country. The case of Poland

Robust Monetary Policy in a Model of the Polish Economy: Is the Uncertainty Responsible for the Interest Rate Smoothing Effect?

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