The Relativity Theory Revisited: Is Publishing Interest Rate Forecasts Really so Valuable? pptx

Warsaw, November 2008
The Relativity Theory Revisited: Is Publishing
Interest Rate Forecasts Really so Valuable?
0LFKDï%U]R]D%U]H]LQD
Adam Kot
NATIONAL BANK OF POLAND
WORKING PAPER
No. 52
Design:
Oliwka s.c.
Layout and print:
1%33ULQWVKRS
Published by:
1DWLRQDO%DQNRI3RODQG
'HSDUWPHQWRI,QIRUPDWLRQDQG3XEOLF5HODWLRQV
:DUV]DZD¥ZLÚWRNU]\VND6WUHHW
SKRQHID[
Ņ&RS\ULJKWE\WKH1DWLRQDO%DQNRI3RODQG
KWWSZZZQESSO
0LFKDï%U]R]D%U]H]LQDļ1DWLRQDOEDQNRI3RODQGDQG:DUVDZ6FKRRORI(FRQRPLFV
HPDLOPLFKDOEU]R]DEU]H]LQD#PDLOQESSO
$GDP.RWļ1DWLRQDO%DQNRI3RODQGDQG:DUVDZ6FKRRORI(FRQRPLFV
HPDLODNRW#VJKZDZSO
:HZRXOGOLNHWRWKDQN0.RODVD$6ïDZLñVNL36RGHUOLQG-6XGD3:HO]DQG
-&:LOOLDPVDVZHOODVSDUWLFLSDQWVRIWKH:,(0FRQIHUHQFHDQGRIWKH1%3VHPLQDU
IRUKHOSIXOFRPPHQWV
7KHYLHZVH[SUHVVHGLQWKLVSDSHUDUHRXURZQDQGGRQRWQHFHVVDULO\UHIOHFWWKHSRVLWLRQ
RIWKH1DWLRQDO%DQNRI3RODQG
Contents
:25.,1*3$3(51R
3

Contents
List of tables and figures 4
Abstract 5
1Introduction 6
2The Model 9
3Expectations 11
4Simulations and results 14
6LPXODWLRQV 4
5HVXOWV 4
5Conclusions 17
References 18
Appendix 1 21
Appendix 2 23
/LVWRIWDEOHVDQGILJXUHV
National Bank of Poland
4
/LVWRIWDEOHVDQGILJXUHV
Table 1 ,QIRUPDWLRQVWUXFWXUHDSSOLHGLQWKHPRGHO 
Table 2 %DVHOLQHVFHQDULRSDUDPHWUL]DWLRQ 
Table 3 Average central bank loss and gains in the baseline scenario 
Table 4 7D\ORUUXOHFRHIILFLHQWVLQWKHEDVHOLQHVFHQDULR 
Figure 1 $YHUDJHFHQWUDOEDQNORVVIRUGLIIHUHQWYDOXHVRIhbea under various
monetary policy rules 
Figure 2 $YHUDJHFHQWUDOEDQNORVVIRUGLIIHUHQWYDOXHVRIe under various
monetary policy rules 
Figure 3 $YHUDJHFHQWUDOEDQNORVVIRUGLIIHUHQWYDOXHVRI
S
Z^
under various
monetary policy rules 


Abstract
:25.,1*3$3(51R
5
Abstract
,QD1HZ.H\QHVLDQPRGHOZLWKDV\PPHWULFLQIRUPDWLRQDQGOHDUQLQJZHVKRZWKDW
SXEOLFDWLRQRIPDFURHFRQRPLFSURMHFWLRQVDQGRIWKHIXWXUHLQWHUHVWUDWHSDWKE\WKH
FHQWUDOEDQNFDQLPSURYHPDFURHFRQRPLFRXWFRPHV+RZHYHUWKHJDLQVIURPSXEOLVKLQJ
LQWHUHVWUDWHSDWKVDUHVPDOOUHODWLYHWRWKRVHIURPSXEOLVKLQJPDFURHFRQRPLFSURMHFWLRQV
*LYHQWKDWPRVWLQIODWLRQWDUJHWLQJFHQWUDOEDQNVDUHDOUHDG\SXEOLVKLQJPDFURHFRQRPLF
SURMHFWLRQVWKLVPHDQVWKDWPRVWJDLQVIURPLQFUHDVLQJWUDQVSDUHQF\LQWKLVDUHDPD\
DOUHDG\KDYHEHHQUHDSHG7KLVWRJHWKHUZLWKWKHSRWHQWLDOFRVWVPD\H[SODLQWKHUHODWLYH
UHOXFWDQFHRIFHQWUDOEDQNVWRSXEOLVKLQWHUHVWUDWHSDWKV
-(/(((
.H\ZRUGVLQWHUHVWUDWHSDWKPRQHWDU\SROLF\DGDSWLYHOHDUQLQJ
Introduction
National Bank of Poland
6
1
1
Introduction
The last two decades have witnessed a substantial increase in transparency about
DFWLRQVRIPRQHWDU\DXWKRULWLHV&HQWUDOEDQNHUVZLGHO\VKDUHWKHYLHZWKDWWKHLUPDLQ
LPSDFWRQWKHHFRQRP\LVQRWYLDVKRUWWHUPLQWHUHVWUDWHVWKH\FRQWUROEXWYLDH[SHFWDWLRQV
RIIXWXUHSROLF\DFWLRQV,WLVIDLUO\HDV\WRVKRZZLWKLQVWDQGDUGPLFURIRXQGHGPRGHOV
XVHGIRUPRQHWDU\SROLF\DQDO\VLVHJ:RRGIRUGWKDWZKDWPDWWHUVIRUHFRQRPLF
DJHQWVZKHQWKH\PDNHGHFLVLRQVDERXWFXUUHQWSULFHVLQYHVWPHQWDQGFRQVXPSWLRQLVWKH
ZKROHSDWKRIIXWXUHH[SHFWHGLQWHUHVWUDWHV7DNLQJWKLVLQWRDFFRXQWFHQWUDOEDQNHUVKDYH
PDGHDJUHDWHIIRUWWRDWOHDVWLQGLUHFWO\JXLGHWKHVHH[SHFWDWLRQV$OOLQIODWLRQWDUJHWHUV


,7VHWSXEOLFO\DQXPHULFDOWDUJHWIRULQIODWLRQ0RVWSXEOLVKUHSRUWVZKHUHWKH\H[SODLQ
WKHLUPRQHWDU\SROLFLHV6HYHUDOFHQWUDOEDQNVGHFLGHGWRSXEOLVKPLQXWHVIURPPHHWLQJV
RIWKHLUGHFLVLRQPDNLQJERGLHV/DVWEXWQRWOHDVWDYDVWPDMRULW\GHFLGHGWRVKRZWKHLU
LQIODWLRQDQG*'3SURMHFWLRQV2QWKHRWKHUKDQGKRZHYHURQO\DOLPLWHGQXPEHURIFHQWUDO
EDQNVGHFLGHGWRGRļZKDWRQWKHILUVWYLHZVHHPVWKHPRVWHIILFLHQWZD\RIJXLGLQJ
H[SHFWDWLRQVRQIXWXUHLQWHUHVWUDWHVļWRSXEOLVKWKHLUYLHZRQWKHPRVWOLNHO\SDWKIRU
LQWHUHVWUDWHV&XUUHQWO\RQO\1HZ=HDODQG1RUZD\6ZHGHQDQGWKH&]HFK5HSXEOLFVKRZ
H[SOLFLWO\H[SHFWHGLQWHUHVWUDWHSDWKV2WKHUEDQNVSUHIHUWRJXLGHWKHPDUNHWVLQGLUHFWO\

7KHODVWWZRH[DPSOHVRILQFUHDVLQJFHQWUDOEDQNWUDQVSDUHQF\ZLOOEHH[SOLFLWO\
DQDO\VHGLQWKLVSDSHU:HZRQGHUZK\PRVW FHQWUDOEDQNV GHFLGHGWRSXEOLVK
PDFURHFRQRPLFSURMHFWLRQVEXWRQO\IHZVWDUWHGWRVKRZIXWXUHLQWHUHVWUDWHSDWKV
2EYLRXVO\ERWKGHFLVLRQVEULQJFRVWVDQGEHQHILWV&HQWUDOEDQNVZHUHUHOXFWDQWWRVKRZ
PDFURHFRQRPLFIRUHFDVWVEHFDXVHLDRISRVVLEOHUHSXWDWLRQDOFRVWVUHODWHGWREHLQJZURQJ
0RUHRYHUWKH\IHDUHGWKDWWKHFRQGLWLRQDOQDWXUHRISURMHFWLRQVFRXOGEHPLVXQGHUVWRRG
ļKLJKLQIODWLRQSURMHFWHGXQGHUDFRQVWDQWLQWHUHVWUDWHDVVXPSWLRQFRXOGIXHOLQIODWLRQ
H[SHFWDWLRQVLQVWHDGRIVKRZLQJWKDWPRQHWDU\SROLF\ZRXOGEHWLJKWHQHGLQRUGHUWREULQJ
LQIODWLRQEDFNWRWDUJHW2QWKHRWKHUKDQGFHQWUDOEDQNHUVijLQWXLWLRQDVZHOODVIRUPDO
PRGHOVVXJJHVWHGWKDWSXEOLVKLQJSURMHFWLRQVDQGVKRZLQJWKHPRGHORIWKHHFRQRP\
FRXOGLPSURYHPDFURHFRQRPLFRXWFRPHV7DNLQJWKHVHDUJXPHQWVDQGSRVVLEO\RWKHUOLNH
SHHUSUHVVXUHHJ)UDFDVVRHWDOLQWRFRQVLGHUDWLRQPRVWLQIODWLRQWDUJHWLQJFHQWUDO
EDQNVGHFLGHGWRIROORZWKHSDWKSDYHGE\WKH%DQNRI(QJODQGLQDQGVWDUWHGWR
SXEOLVKWKHLUPDFURHFRQRPLFSURMHFWLRQVLQWKHIRUPRIIDQFKDUWV
6LPLODUDUJXPHQWVDUHUDLVHGLQWKHGHEDWHZKHWKHURUQRWWRSXEOLVKLQWHUHVWUDWH
IRUHFDVWV*RRGKDUW.LQJ:HEHU5XGHEXVFK2QWKHRQHKDQGWKHUH
DUHFRVWVUHODWHGWRUHSXWDWLRQDQGPLVXQGHUVWDQGLQJV&HQWUDOEDQNVIHDUWKDWVKRZLQJDQ
LQWHUHVWUDWHSDWKPD\EHWDNHQE\WKHSXEOLFIRUFRPPLWPHQWWRIROORZWKLVSDWK7KLV
FRXOGQHJDWLYHO\DIIHFWWKHEDQNijVUHSXWDWLRQRQFHLWGHYLDWHVIURPWKHDQQRXQFHGSDWK
$GGLWLRQDOO\WKLVFRXOGOHDGWRVXERSWLPDODOORFDWLRQVLIWKHFRQGLWLRQDOQDWXUHRIWKHVH
SDWKVZHUHQRWXQGHUVWRRGSURSHUO\)XUWKHULWLVGLIILFXOWWRHPEHGLQWHUHVWUDWHVSDWKV

LQWRWKHPRQHWDU\SROLF\GHFLVLRQPDNLQJSURFHVVHVSHFLDOO\ZKHQGHFLVLRQVDUHWDNHQ
E\FRPPLWWHHVFRPSULVLQJRIPRUHWKDQRQHPHPEHU7KHUHLVDOVRDULVNWKDWUHYHDOLQJ
LQWHUHVWUDWHVSDWKVFRXOGFRQVWUDLQWKHPRQHWDU\DXWKRULW\E\QDUURZLQJWKHVSHFWUXPRI
LWVSRVVLEOHIXWXUHFKRLFHVWKXVXQGHUPLQLQJSROLF\HIIHFWLYHQHVV2QWKHRWKHUKDQGWKHUH

:HXVHWKHWHUPinflation targetersIRUFRQYHQLHQFH2EYLRXVO\WKHDQDO\VLVDSSOLHVHTXDOO\OLNHO\WR
FHQWUDOEDQNVZKROLNHWKH(&%RUWKH)('IROORZVLPLODUPRQHWDU\SROLF\VWUDWHJLHVZLWKRXWFDOOLQJWKHP
H[SOLFLWO\inflation targeting.

6HH5XGHEXVKDQG:LOOLDPVIRUDWKRURXJKGLVFXVVLRQRIVLJQDOOLQJRISROLF\LQFOLQDWLRQV
Introduction
:25.,1*3$3(51R
7
1
DUHSRWHQWLDOJDLQVUHODWHGWREHWWHUJXLGLQJH[SHFWDWLRQVDQGDVDUHVXOWVOHDGLQJWRORZHU
YRODWLOLW\RIRXWSXWDQGLQIODWLRQ
2QHSRVVLEOHH[SODQDWLRQZK\GHVSLWHSRWHQWLDOO\VLPLODUFRVWVFHQWUDOEDQNVZHUH
PXFKPRUHNHHQWRSXEOLVKPDFURHFRQRPLFSURMHFWLRQVWKDQLQWHUHVWUDWHSDWKVLVWKDW
IRUPDOO\RULQWXLWLYHO\WKH\NQRZWKDWWKHPDMRULW\RIDWWDLQDEOHEHQHILWVKDVDOUHDG\EHHQ
UHDSHGE\SXEOLVKLQJWKHPDFURHFRQRPLFSURMHFWLRQ.DKQ,QRWKHUZRUGVLWLV
UHODWLYHO\GLIILFXOWIRUDJHQWVWRPRGHOWKHHFRQRP\DQGPDNHIRUHFDVWVRIRXWSXWDQG
LQIODWLRQ,QIDFWRQO\IHZDQDO\VWVGRVRWKHPDMRULW\RIWKHSRSXODWLRQGRHVQRWEXLOG
HFRQRPHWULFPRGHOV6RLPSURYHPHQWLQXQGHUVWDQGLQJWKHHFRQRP\IURPVKRZLQJ
SURMHFWLRQVFDQEHKXJH+RZHYHURQFHDJHQWVKDYHWKHSURMHFWLRQDQGREVHUYHWKH
EHKDYLRXURIRXWSXWDQGLQIODWLRQUHODWLYHWRWDUJHWWKH\FDQUHODWLYHO\HDVLO\VKRZWKHOLNHO\
GLUHFWLRQLQZKLFKLQWHUHVWUDWHVZLOOPRYH+HQFHWKHLQIRUPDWLRQDOJDLQVIURPDGGLWLRQDOO\
publishing the interest rate path may be minor.
,QWKLVSDSHUZHWUHDWWKLVSUREOHPIRUPDOO\2QWKHEDVLVRIDVLPSOHWKUHHHTXDWLRQ
PRGHORIWKHHFRQRP\ZHFDOFXODWHWKHSRWHQWLDOJDLQVIURPSXEOLVKLQJDPDFURHFRQRPLF
SURMHFWLRQDQGFRPSDUHWKHPWRWKHEHQHILWVWKDWFDQEHDFKLHYHGE\DGGLWLRQDOO\SXEOLVKLQJ

DQLQWHUHVWUDWHSDWK,QRXUPRGHOWKHUHLVDQDV\PPHWU\RILQIRUPDWLRQEHWZHHQWKHFHQWUDO
EDQNDQGWKHSXEOLFZKLFKFDQEHUHGXFHGHLWKHUE\OHDUQLQJRQWKHVLGHRIWKHSXEOLFRUE\
SXEOLVKLQJIRUHFDVWVE\WKHFHQWUDOEDQN2XUUHVXOWVFRQILUPWKHLQWXLWLRQWKHJDLQVIURP
VKRZLQJWKHSURMHFWLRQDUHVXEVWDQWLDOO\ELJJHUWKHQWKRVHIURPDGGLWLRQDOO\VKRZLQJWKH
LQWHUHVWUDWHSDWK7KLVPHDQVWKDWPRVWJDLQVIURPLQFUHDVHGFHQWUDOEDQNWUDQVSDUHQF\LQ
WKLVDUHDPD\DOUHDG\KDYHEHHQUHDSHGZKHQFHQWUDOEDQNVVWDUWHGWRSXEOLVKSURMHFWLRQV
7KHUHPDLQLQJJDLQVDUHUHODWLYHO\VPDOOZKDWJLYHQWKHDIRUHPHQWLRQHGFRVWVDQGIHDUV
PD\H[SODLQZK\EDQNVDUHUHODWLYHO\UHOXFWDQWWRVKRZIXWXUHLQWHUHVWUDWHSDWKV
7KHJDLQVDQGFRVWVRILQFUHDVLQJFHQWUDOEDQNWUDQVSDUHQF\KDYHEHHQUHFHQWO\
widely analysed in the literature. The literature on the relationship between central bank
WUDQVSDUHQF\DQGPDFURHFRQRPLFRXWFRPHVJRHVEDFNWRWKHijVDQGWKHFRQWULEXWLRQV
RI&XNLHUPDQDQG0HOW]HUDQG*RRGIULHQG

7KHLVVXHRISXEOLVKLQJPDFURHFRQRPLFSURMHFWLRQVDQGLQWHUHVWUDWHSDWKV
FRQVWLWXWHVRQO\DVPDOOVXEVHWRIWKLVOLWHUDWXUH7DUNNDDQG0D\HVVKRZRQWKH
EDVLVRID%DUUR*RUGRQPRGHOWKDWSXEOLVKLQJIRUHFDVWVLPSURYHVPDFURHFRQRPLF
SHUIRUPDQFHHYHQLIWKHIRUHFDVWLVLPSUHFLVH&KRUWDUHDV6WDVDYDJHDQG6WHUQH
VKRZRQHPSLULFDOJURXQGVWKDWSXEOLVKLQJFHQWUDOEDQNIRUHFDVWVLVDVVRFLDWHGZLWKORZHU
LQIODWLRQWKRXJKHQGRJHQHLW\LVVXHVFDQQRWEHIXOO\UXOHGRXW*HUDDWVXVHVDJDPH
WKHRUHWLFDSSURDFKWRVKRZWKDWSXEOLVKLQJPDFURHFRQRPLFIRUHFDVWVORZHUVWKHLQIODWLRQ
ELDV,WPXVWEHKRZHYHUQRWHGWKDWWKHOLWHUDWXUHDOVRGHVFULEHVQHJDWLYHFRQVHTXHQFHV
RIFHQWUDOEDQNWUDQVSDUHQF\)RUH[DPSOHLQ&XNLHUPDQijVPRGHOWKHFHQWUDOEDQN
UHYHDOVLQIRUPDWLRQDERXWXSFRPLQJVKRFNVDQGWKXVLPSHGHVLWVRZQDELOLW\WRVWDELOLVH
WKHHFRQRP\E\VXUSULVLQJDJHQWV6LPLODUDUJXPHQWVDUHJLYHQE\*HUVEDFK
7KHLVVXHRISXEOLVKLQJLQWHUHVWUDWHSDWKVKDVEHHQWDNHQXSLQWKHOLWHUDWXUHDVZHOO
)DXVWDQG/HHSHUDQDO\VHGDWDIURPPDFURHFRQRPLFSURMHFWLRQVRIWKH%DQNRI
(QJODQGWKH)HGDQGWKH5LNVEDQN7KH\FRQFOXGHWKDWWKHFRQGLWLRQDOIRUHFDVWVSXEOLVKHG
E\WKHVHLQVWLWXWLRQVZHUHRIOLWWOHYDOXHWRPDUNHWSDUWLFLSDQWV,QVWHDGWKH\DUJXHFHQWUDO
EDQNVVKRXOGVKRZXQFRQGLWLRQDOIRUHFDVWVEDVHGRQWKHPRVWOLNHO\SDWKRILQWHUHVWUDWHV
)HUUHURDQG6HFFKLUHYLHZTXDQWLWDWLYHDQGTXDOLWDWLYHLQWHUHVWUDWHIRUHFDVWVRIIRXU

FHQWUDOEDQNVDQGFRQFOXGHWKDWWKHLUSXEOLFDWLRQLPSURYHVWKHDELOLW\RIPDUNHWRSHUDWRUV
WRSUHGLFWPRQHWDU\SROLF\GHFLVLRQV(XVHSSLDQG3UHVWRQVKRZWKDWZKHQWKH
FHQWUDOEDQNGRHVQRWKDYHIXOONQRZOHGJHDERXWWKHHFRQRP\FRPPXQLFDWLQJGHWDLOVDERXW
PRQHWDU\SROLF\UXOHVKHOSVUHVWRUHVWDELOLW\5XGHEXVKDQG:LOOLDPVXVHDVWDQGDUG

,PSRUWDQWUHFHQWFRQWULEXWLRQVLQFOXGHLD0RUULVDQG6KLQ(KUPDQQDQG)UDW]VFKHURU:DOVK
&RPSUHKHQVLYHVXUYH\VDUHSURYLGHGE\*HUDDWVDQGYDQGHU&UXLMVHQDQG(LMIILQJHU
Introduction
National Bank of Poland
8
1
New Keynesian model with learning to show that publishing the interest rate path lowers the
YDULDELOLW\RIRXWSXWDQGLQIODWLRQ*RVVHOLQHWDOXVHDPRGHOZLWKKHWHURJHQHURXV
LQIRUPDWLRQWRVKRZWKDWWKHSXEOLFDWLRQRIDQLQWHUHVWUDWHSDWKPD\LQFUHDVHRUUHGXFH
ZHOIDUHGHSHQGLQJRQWKHUHODWLYHTXDOLW\RIVLJQDOVUHFHLYHGE\WKHFHQWUDOEDQNDQGWKH
SXEOLF7KHJDLQVLQFUHDVHZLWKWKHGLIILFXOW\WRLQIHUWKHREMHFWLYHVRIPRQHWDU\DXWKRULWLHV
7RRXUNQRZOHGJHQRVWXG\DWWHPSWHGWRFRPSDUHWKHJDLQVIURPSXEOLVKLQJPDFURHFRQRPLF
SURMHFWLRQVDQGWKHLQWHUHVWUDWHSDWK2XUSDSHUWULHVWRILOOWKLVJDS
On technical grounds our paper is directly linked to an increasing literature on
learning
4
DQGLWVDGDSWDWLRQWRPRQHWDU\SROLF\/HDUQLQJLVDQDWXUDOIUDPHZRUNIRU
DQDO\VLQJWKHJDLQVIURPLQFUHDVHGFHQWUDOEDQNWUDQVSDUHQF\8QGHUUDWLRQDOH[SHFWDWLRQV
DJHQWVNQRZWKHHFRQRPLFPRGHODQGKHQFHWKHUHLVQRURRPIRUWKHFHQWUDOEDQNWR
LPSURYHWKHLUIRUHFDVWVE\UHYHDOLQJSURMHFWLRQV+RZHYHULIRQHDVVXPHVWKDWDJHQWijV
NQRZOHGJHRIWKHHFRQRPLFPRGHOLVLPSHUIHFW

FHQWUDOEDQNVDVVXPHGWRNQRZWKH
PRGHOSHUIHFWO\FDQVKDUHWKHLUNQRZOHGJHKHQFHLPSURYHSULYDWHIRUHFDVWVDQGWKHRYHUDOO
PDFURHFRQRPLFRXWFRPH2QWKHRWKHUKDQGLIDFHQWUDOEDQNVFKRRVHVQRWWRGLVFORVH

LWVLQIRUPDWLRQDJHQWVFDQEHDVVXPHGWRIROORZDOHDUQLQJSURFHVVLHXVHSDVWGDWDWR
HVWLPDWHWKHSDUDPHWHUVRIWKHXQGHUO\LQJPRGHO
7KHUHVWRIWKHSDSHULVVWUXFWXUHGDVIROORZV,QVHFWLRQZHSUHVHQWWKHPRGHO,Q
VHFWLRQZHGHVFULEHWKHLVVXHVUHODWHGWRH[SHFWDWLRQIRUPDWLRQ6HFWLRQSUHVHQWVWKH
VLPXODWLRQUHVXOWVDQGVHFWLRQFRQFOXGHV
4
6HH(YDQVDQG +RQNDSRKMD DQGIRULQWURGXFWLRQDQGDFRPSUHKHQVLYHRYHUYLHZRIWKH
current literature.

7KLVDVVXPSWLRQVHHPVMXVWLILHGDVHPSLULFDOVWXGLHVOLNH5RPHUDQG5RPHUDQG3HHNHWDO
VKRZWKDWWKH)HGKDVDQLQIRUPDWLRQDODGYDQWDJHRYHUWKHSXEOLFZKHQFUHDWLQJIRUHFDVWV
The Model
:25.,1*3$3(51R
9
2
2
The Model
2XUPRGHOFRQVLVWVRIWKUHHHTXDWLRQVD3KLOOLSVFXUYHOLQNLQJLQIODWLRQDQG
XQHPSOR\PHQWDQ,6FXUYHOLQNLQJUHDOLQWHUHVWUDWHVDQGXQHPSOR\PHQWDQGDPRQHWDU\
SROLF\UXOHGULYLQJWKHQRPLQDOLQWHUHVWUDWH7KHILUVWWZRHTXDWLRQVDUH


 
1
 

+1
 $



 $




$

 $
1
 $

+1
 


 

+1



where
P
GHQRWHVLQIODWLRQjXQHPSOR\PHQW^ the nominal interest rate and the superscript
ZVWDQGVIRUSRVVLEO\QRQUDWLRQDOH[SHFWDWLRQV)RUFRQYHQLHQFHZLWKRXWORVVRIJHQHUDOLW\
LQZKDWIROORZVWKHQDWXUDOUDWHRIXQHPSOR\PHQWj

ZLOOEHDVVXPHGWREH]HUR7KHWHUPV
E
P

and
E
j
denote ^^YVKRFNVEHLQJUHVSHFWLYHO\C
S
E
P
DQGC
S
E
u
7KLVPRGHOLVFORVHO\
UHODWHGWRWKHK\EULGYHUVLRQRIWKHVWDQGDUG1HZ.H\QHVLDQFORVHGHFRQRP\PRGHODV
SUHVHQWHGLQ*LDQQRQLDQG:RRGIRUG7KHPDLQGLIIHUHQFHEHWZHHQRXUDSSURDFKDQG
WKH1HZ.H\QHVLDQPRGHOLVWKHSUHVHQFHRIWKHXQHPSOR\PHQWJDSLQVWHDGRIWKHRXWSXW
JDS7KLVKRZHYHULVRQO\DPLQRUWHFKQLFDOLVVXHVLQFHWKHVHFRQFHSWVDUHFORVHO\OLQNHGE\WKH
2NXQODZ7KHPDLQDGYDQWDJHRIVXFKVSHFLILFDWLRQLVWKDWLWVSDUDPHWHUVKDYHEHHQUHFHQWO\
HVWLPDWHGIRUWKH86HFRQRP\WDNLQJH[SOLFLWO\LQWRFRQVLGHUDWLRQIRUHFDVWVRILQIODWLRQDQG
XQHPSOR\PHQWIURPWKH6XUYH\RI3URIHVVLRQDO)RUHFDVWHUVļ63)2USKDQLGHVDQG:LOOLDPV
:HEHOLHYHWKDWLQWKHFRQWH[WRIDPRGHOXVHGIRUDQDO\VLQJV\VWHPVXQGHUOHDUQLQJ
VXFKDQDSSURDFKWRIL[LQJPRGHOSDUDPHWHUVLVVXSHULRUWRWKHXVXDOSUDFWLFHRIFDOLEUDWLQJ
SDUDPHWHUVRUHYHQHVWLPDWLQJWKHPXQGHUWKHDVVXPSWLRQRIUDWLRQDOH[SHFWDWLRQV
2XUEHQFKPDUNFDOLEUDWLRQLQHTXLYDOHQWWRWKDWRI2USKDQLGHVDQG:LOOLDPV



1


+1

 $


 


$

$
1
$

+1



 

+1



with
S
E
P

S
E
j

7KLVPRGHOZDVHVWLPDWHGXQGHUWKHDVVXPSWLRQWKDWH[SHFWDWLRQV
DUHIRUPHGDWSHULRGiŞDQGZHVWLFNWRWKLVDVVXPSWLRQWKURXJKRXWWKHSDSHUUHJDUGOHVV
RIZKHWKHUWKH\DUHIRUPHGXQGHU5(RUXQGHUOHDUQLQJ

7KHVWDWHVSDFHUHSUHVHQWDWLRQRI
RXUPRGHOLVSUHVHQWHGLQ$SSHQGL[
0RQHWDU\SROLF\LVPRGHOOHGDVD7D\ORUUXOHOLQNLQJWKHLQWHUHVWUDWHWRSUHYLRXV
SHULRGXQHPSOR\PHQWDQGLQIODWLRQ


 


1
 

$
1
 


where
E
^
GHQRWHVDPRQHWDU\SROLF\VKRFNZKLFKLVDVVXPHG^^Y C
S
E
^
7KLVUHIOHFWV
WKHIDFWWKDWWKHEHKDYLRXURIPRQHWDU\DXWKRULWLHVFDQQRWEHGHVFULEHGSUHFLVHO\E\

DVLPSOHRUHYHQFRPSOLFDWHGUXOH&HQWUDOEDQNHUVWDNHYDULRXVLQIRUPDWLRQLQWRDFFRXQW
PRUHRYHUJLYHQYRWLQJSURFHGXUHVWKHLUGHFLVLRQFDQQRWEHWUHDWHGDVDOLQHDUIXQFWLRQRI
WKHXQGHUO\LQJHFRQRPLFIDFWRUV:HPRGHOWKHVHLVVXHVLQIRUPRIDPRQHWDU\SROLF\VKRFN
)ROORZLQJWKHHVWLPDWLRQLQ6PHWVDQG:RXWHUVDQGGH:DOTXHDQG:RXWHUV
we set its standard deviation to
S
E
^


6HH:HOW]IRUGHULYDWLRQDQGVROXWLRQRIDVLPLODUPRGHOXQGHUWKLVWLPLQJDVVXPSWLRQ
The Model
National Bank of Poland
10
2
:HFRQVLGHUWKUHHYDULDQWVRIGHWHUPLQDWLRQRIWKH7D\ORUUXOHijVSDUDPHWHUV
ľ6WDQGDUGSDUDPHWHUVDVVXJJHVWHGE\7D\ORUFRUUHFWHGIRUWKHIDFWWKDWLQVWHDGRI
the output gap we use the unemployment gap. Taking into account that the variability
RIXQHPSOR\PHQWLVDERXWRIWKHYDULDELOLW\RIRXWSXWRXU7D\ORUUXOHEHFRPHV



1
 $
1

ľ2SWLPDOSDUDPHWHUVGHULYHGIURPPLQLPL]DWLRQRIWKHFHQWUDOEDQNijVORVVIXQFWLRQ
XQGHUWKHDVVXPSWLRQRIDJHQWVIROORZLQJUDWLRQDOH[SHFWDWLRQV8QGHUWKLVUXOHWKH
FHQWUDOEDQNIROORZVWKHVDPHSROLF\UHJDUGOHVVRIZKHWKHUDJHQWVijH[SHFWDWLRQVDUH
IRUPHGUDWLRQDOO\RUXQGHUOHDUQLQJ

ľ2SWLPDOSDUDPHWHUVGHULYHGIURPPLQLPL]DWLRQRIWKHFHQWUDOEDQNijVORVVIXQFWLRQZKHUHDV
WKLVWLPHWKHFHQWUDOEDQNWDNHVLQWRDFFRXQWWKHZD\DJHQWVijH[SHFWDWLRQVDUHIRUPHG
,QZKDWIROORZVWKHVHSROLF\YDULDQWVZLOOEHGHQRWHGUHVSHFWLYHO\DV6755(75DQG
275,QWKHODWWHUFDVHVWKHFHQWUDOEDQNPLQLPL]HVWKHGLVFRXQWHGVXPRIORVVHVVWHPPLQJ
IURPYDULDELOLW\RILQIODWLRQXQHPSOR\PHQWDQGLQWHUHVWUDWHV





=0


8
2
+
 

$
2
+
 


+
 
+1

2
:


For our model we assume
L
j
=4 and
L
^
ZKLFKLVHTXLYDOHQWWRDVWDQGDUGORVV
IXQFWLRQZLWKWKHZHLJKWRQLQIODWLRQDQGRXWSXWJDSYDULDELOLW\EHLQJHTXDODQGIRXUWLPHV
higher than the weight on interest rate variability.
:HGHFLGHGWRUHVWULFWRXUDWWHQWLRQWRWKHIXQFWLRQDOIRUPRID7D\ORUUXOHDQGLJQRUH
IXOO\RSWLPDOGLVFUHWLRQDU\RUFRPPLWPHQWEDVHGSROLFLHVIRUWKHIROORZLQJUHDVRQV
ľ)LUVWWKHIXQFWLRQDOIRUPRIVXFKSROLFLHVGHSHQGVFUXFLDOO\RQWKHXQGHUO\LQJPRGHO
:HWKRXJKWWKDWLWPD\EHXQUHDOLVWLFWRDVVXPHWKDWDJHQWVNQRZWKHIXQFWLRQDOIRUP
RIFRPSOLFDWHGPRGHOVSHFLILFUHDFWLRQIXQFWLRQ2QWKHRWKHUKDQGDVVXPLQJWKDWWKH
IXQFWLRQDOIRUPHVWLPDWHGE\DJHQWVGLIIHUVIURPWKHWUXHUHDFWLRQIXQFWLRQPD\UHVXOWLQ
QRQFRQYHUJHQFHWRWKHUDWLRQDOH[SHFWDWLRQVHTXLOLEULXP(YDQVDQG+RQNDSRKMD
ľ6HFRQGWKHOLWHUDWXUHVKRZVWKDWLQWURGXFLQJRSWLPDOSROLFLHVWRPRGHOVZLWKOHDUQLQJPD\
UHVXOWLQLQGHWHUPLQDQF\HJ(YDQVDQG0F*RXJK(YDQVDQG+RQNDSRKMD
'HQQLVDQG5DYHQQD7KLVVWUHDPRIUHVHDUFKVHHPVWREHVWLOOGHYHORSLQJDQG
ZHGHFLGHGDWOHDVWDVDILUVWDSSURDFKWRDYRLGLW1HYHUWKHOHVVZHWKLQNWKDWDQDWWHPSW
WRLQWURGXFHIXOO\RSWLPDOSROLF\PD\EHDQLQWHUHVWLQJH[WHQVLRQIRUIXWXUHUHVHDUFK
,QFRQWUDVWWRDQXPEHURIUHFHQWVWXGLHVHJ2USKDQLGHVDQG:LOOLDPVDQG
5XGHEXVFKDQG:LOOLDPVZHGRQRWLQWURGXFHLQWRRXUPRGHOYDULDEOHQDWXUDOUDWHV
RIXQHPSOR\PHQWRULQWHUHVWQRUYDULDEOHLQIODWLRQWDUJHWV7KLVGHFLVLRQFRPHVIURPRXU
SUHIHUHQFHWRWUHDWYDULRXVSDUWVRIWKHPRGHOOHGHFRQRP\V\PPHWULFDOO\DVUHJDUGVWKH
HDVLQHVVRISDUDPHWHUHVWLPDWLRQE\OHDUQLQJDJHQWV)RULQVWDQFHDYDULDEOHQDWXUDOUDWHRI
XQHPSOR\PHQWPDNHVLWPRUHGLIILFXOWWRHVWLPDWHSURSHUO\WKH3KLOOLSVFXUYHDQGKHQFH
LQFUHDVHVWKHSRWHQWLDOJDLQVIURPSXEOLFDWLRQRIDPDFURHFRQRPLFSURMHFWLRQ2QWKHRWKHU
KDQGDYDULDEOHLQIODWLRQWDUJHWPDNHVLWPRUHGLIILFXOWWRHVWLPDWHWKHPRQHWDU\SROLF\

UHDFWLRQIXQFWLRQLQFUHDVLQJWKHSRWHQWLDOJDLQVIURPVKRZLQJWKHLQWHUHVWUDWHSDWK
$VDILUVWDSSUR[LPDWLRQWRKRZWKLVDIIHFWVRXUUHVXOWVZHWKLQNWKDWYDULDEOHQDWXUDO
UDWHVRIXQHPSOR\PHQWRULQWHUHVWDUHFRQWHPSRUDQHRXVO\SUREDEO\PRUHFRQIXVLQJWKDQ
YDULDEOHLQIODWLRQWDUJHWV&HQWUDOEDQNVLQSDUWLFXODULQIODWLRQWDUJHWHUVKDYHUHFHQWO\EHHQ
YHU\RSHQDVUHJDUGVSXEOLFDWLRQRILQIODWLRQWDUJHWVZKLOHDVXEVWDQWLDOOLWHUDWXUHGRFXPHQWV
WKHGLIILFXOWLHVUHODWHGWRHVWLPDWLQJQDWXUDOUDWHVRIXQHPSOR\PHQWDQGLQWHUHVW7KXVE\
omitting these elements we are likely erring on the upside when assessing the relative gains
IURPSXEOLVKLQJLQIODWLRQUDWHSDWKVDQGPDFURHFRQRPLFSURMHFWLRQV+HQFHLQFOXVLRQRI
YDULDEOHUDWHVDQGWDUJHWVZRXOGSUREDEO\UHLQIRUFHRXUFRQFOXVLRQV
([SHFWDWLRQV
:25.,1*3$3(51R
11
3
3
([SHFWDWLRQV
:HFRQVLGHUWKUHHYDULDQWVRISULYDWHDJHQWVH[SHFWDWLRQVijIRUPDWLRQGHSHQGLQJRQ
WKHLQIRUPDWLRQRQWKHHFRQRP\DQGFHQWUDOEDQNSUHIHUHQFHVWKH\SRVVHV7KLVLQIRUPDWLRQ
is assumed to be conditional on what the central bank reveals.
7KHILUVWYDULDQWGHQRWHGE\9UHIHUVWRDVLWXDWLRQZKHQDJHQWVGRQRWNQRZWKH
WUXHVWUXFWXUHRIWKHPRGHOGULYLQJWKHHFRQRP\WKHSDUDPHWHUVRIWKLVPRGHOQRUWKH
FHQWUDOEDQNSROLF\UXOH6XFKDVHWXSPD\EHFRQVLGHUHGWRFRUUHVSRQGWRDQRSDTXH
FHQWUDOEDQNZKRGRHVQRWVKDUHWKHUHVXOWVRIKLVUHVHDUFKRQWKHVWUXFWXUHRIWKHHFRQRP\
QRUPDFURHFRQRPLFSURMHFWLRQVZLWKWKHSXEOLF,QDGGLWLRQLWGRHVQRWGLVFORVHWKHUXOH
LWXVHVWRVHWLQWHUHVWUDWHV/LNHDOO,7FHQWUDOEDQNVLWUHYHDOVWRWKHSXEOLFWKHQXPHULFDO
LQIODWLRQWDUJHWDQGWKHFXUUHQWSROLF\LQWHUHVWUDWH,WVSURMHFWLRQVPRGHOVDQGSRVVLEOH
IXWXUHLQWHUHVWUDWHSDWKVDUHNHSWVHFUHW

+DYLQJQRNQRZOHGJHDERXWWKHWUXHPRGHORIWKHHFRQRP\QRUWKHFHQWUDOEDQN
SROLF\UXOHDJHQWVOHDUQWKHPRQWKHEDVLVRISDVWGDWD7RGRVRWKH\HVWLPDWHDWKUHH
YDULDEOH9$5UHIOHFWLQJWKHLUSHUFHLYHGORZRIPRWLRQ3/0



$







 A


$
1

1

1





%

%

%





(VWLPDWLRQRIWKHFRHIILFLHQWPDWUL[6LVSHUIRUPHGHTXDWLRQE\HTXDWLRQZLWK
VWDQGDUG2/67KHHVWLPDWLRQVDPSOHLVDPRYLQJZLQGRZDQGLQWKHEDVHOLQHVFHQDULRLW
FRYHUVODVWREVHUYDWLRQVLHIURPiŞWLOOiŞWKHHDUOLHUGDWDLVVLPSO\IRUJRWWHQE\
agents.
7KLV9$5LVQH[WDSSOLHGWRFRPSXWHH[SHFWDWLRQV^
Z
i
j
Z
i
and
P
Z
i
$WZRSHULRG
DKHDGG\QDPLFIRUHFDVWVLVFRPSXWHGDFFRUGLQJWR


$











 A


$
1

1

1



and


$

+1


+1


+1


 A



$











6KRFNV
E
P
i

E
ji
and
E
^i
at periods i and iDUHDVVXPHGWREHXQNQRZQWRWKH
DJHQWV7KHH[SHFWDWLRQV^
Z
i
j
Z
i

j
Z
i
and
P
Z
i
DUHWKHQSOXJJHGLQWRWKHWUXHPRGHORIWKH
HFRQRP\FRQVLVWLQJRIDQGWRREWDLQWKHDFWXDOODZRIPRWLRQ$/0:KHQ
shocks
E
P
i

E
ji
and
E
^i
arrive this can be used to generate ^
i
j
i
and
P
i
.
The second variant K'GLIIHUVIURPK& in that economic agents are assumed to
NQRZWKHPDFURHFRQRPLFSURMHFWLRQRIWKHFHQWUDOEDQN0RGHOOLQJWKLVIRUPDOO\SRVHV


([DPSOHVRIFHQWUDOEDQNVRSHUDWLQJXQGHUVXFKDVHWXSDUHXVXDOO\QHZ,7DGRSWHUVZKRFRPPLWWRDQ
LQIODWLRQWDUJHWEXWDUHQRW\HWUHDG\RUIXOO\FRQYLQFHGWRGLVFORVHPRUHRXWRIWKHLUSROLF\DQDO\VLVV\VWHPV)RU
LQVWDQFH3RODQGXVHGWRRSHUDWHXQGHUVXFKDVHWXSIRUDOPRVW\HDUVDIWHUIRUPDODGRSWLRQRI,7LQ
([SHFWDWLRQV
National Bank of Poland
12
3
WKHTXHVWLRQZKDWLWPHDQVWRDJHQWVWRNQRZDSURMHFWLRQ&HQWUDOEDQNVXVXDOO\VKRZ
WKHSURMHFWHGSDWKVIRULQIODWLRQDQGRXWSXWEDVHGRQDQH[RJHQRXVHJFRQVWDQWRU
PDUNHWH[SHFWDWLRQVEDVHGLQWHUHVWUDWHSDWK'XHWRWKHLQWHUHVWUDWHDVVXPSWLRQVXFK
DSURMHFWLRQFDQQRWIRUPDOO\EHFRQVLGHUHGDVDQXQFRQGLWLRQDOIRUHFDVWRIPDFURHFRQRPLF
YDULDEOHVDQGZHUHIUDLQIURPGLUHFWO\XVLQJLWWRFRQVWUXFWDJHQWVijH[SHFWDWLRQV,QFRQWUDVW
we consider two alternative solutions:
ľWKHSURMHFWLRQFDQEHFRQVLGHUHGDVDQDGGLWLRQDOGDWDVHWGHULYHGIURPWKH
FHQWUDOEDQNijVHFRQRPHWULFPRGHOZKLFKE\DVVXPSWLRQUHIOHFWVWKH$/0RIWKH
HFRQRP\7KLVGDWDVHWPD\EHHVSHFLDOO\YDOXDEOHIRUDJHQWVVLQFHLWLVOHVVQRLV\WKDQ
PDFURHFRQRPLFGDWDļWKHRQO\VRXUFHRIYDULDELOLW\LVWKHH[RJHQRXVLQWHUHVWUDWH
SDWKZKLOHDOOVKRFNVDUHVHWWR]HUR$FFRUGLQJO\ZHDVVXPHWKDWDJHQWVDSSHQGWKH
SURMHFWLRQGDWDWRWKHGDWDVHWWKH\DOUHDG\SRVVHVVZKHQHVWLPDWLQJWKHILUVWWZR
HTXDWLRQVRIWKH9$5LHZLWKj
i
and
P
i
RQWKHOHIWKDQGVLGH$JHQWVGRQRW
LQFUHDVHWKHLUGDWDVHWZKHQHVWLPDWLQJWKHSROLF\UXOHVLQFHWKH\NQRZWKDWWKHGDWD
IRULWZDVJHQHUDWHGH[RJHQRXVO\+HQFHDJHQWVDFWDVLQK&ZLWKWKHRQO\GLIIHUHQFH
WKDWWKH\KDYHDODUJHUGDWDVHW([SHFWDWLRQV^
Z
i

j
Z
i
j
Z
i
and
P
Z
i
DUHWKHQIRUPHG
DFFRUGLQJWRDQG
ľLQFHQWUDOEDQNLQJSUDFWLFHDQLQKHUHQWSDUWRIVKRZLQJPDFURHFRQRPLFSURMHFWLRQV
LVWKHSXEOLFDWLRQRIWKHXQGHUO\LQJHFRQRPHWULFPRGHO6LQFHWKHVHSXEOLVKHGPRGHOV
XVXDOO\GRQRWFRQWDLQPRQHWDU\SROLF\UXOHVWKLVLVHTXLYDOHQWWRVKRZLQJHTXDWLRQV
DQGWRWKHDJHQWVDWOHDVWWRWKRVHZKRUHDGFHQWUDOEDQNZRUNLQJSDSHUV
6LQFHDJHQWVNQRZWKHPRGHOGULYLQJWKHHFRQRP\DOOWKH\QHHGLQDGGLWLRQWREXLOG
H[SHFWDWLRQVIRUi and iLVWKHSROLF\UXOH6LPLODUO\WRK&WKH\OHDUQLWIURPSDVW
GDWDZKLFKLVXVHGWRHVWLPDWHWKHSROLF\UXOH


 


1
 

$
1
 %



(VWLPDWLRQLVSHUIRUPHGE\2/6RQDQSHULRGPRYLQJVDPSOHLQWKHEDVHOLQH
FDVH1H[WDJHQWVDGGWKHHVWLPDWHGSROLF\UXOHWRWKHPRGHORIWKHHFRQRP\SXEOLVKHGE\
WKHFHQWUDOEDQNDQG7KHUHIRUHWKHPRGHO3/0WKH\XVHWRFRPSXWHH[SHFWDWLRQV
IRUi and iEHFRPHV


 
1
 

+1
 $


 


$

 $
1
 $

+1
 


 


+1






;



1

;


$
1
 


ZKHUHHVWLPDWHVRISDUDPHWHUVREWDLQHGWKURXJKOHDUQLQJDUHGHQRWHGZLWKKDWV
F
Ü
P
and
F
Ü
j

7KHPRGHOLVVROYHGXQGHUUDWLRQDOH[SHFWDWLRQVDQGJLYHQWKHGDWDIRUSHULRGiŞ WKH
solution is used to obtain ^
Z
i
j
Z
i
j
Z
i
and
P
Z
i
.
2EYLRXVO\IROORZLQJWKHVHWZRDSSURDFKHVOHDYHVWKHDJHQWVZLWKGLIIHUHQWIRUHFDVWV
DQGUHVXOWVLQGLIIHUHQW$/0V,QWXLWLYHO\SXEOLFDWLRQRIWKHPRGHOLVPRUHYDOXDEOHWKDQ
RQO\LQFUHDVLQJWKHGDWDVHWVRWKHFKRLFHRIWKHDSSURDFKPXVWPDWWHUIRURXUUHVXOWV,W
VHHPVXQOLNHO\WKDWDOODJHQWVUHDGWKHFHQWUDOEDQNijVSXEOLFDWLRQEXWFHUWDLQO\VRPHGR
0RUHRYHUWKHLUUHDGLQJLVRIWHQVKDUHGZLWKWKHUHVWRIWKHSRSXODWLRQLQIRUPRISULYDWH
IRUHFDVWVHJSXEOLVKHGE\FRPPHUFLDOEDQNV$FFRUGLQJO\ZHGHFLGHGWRFRQVWUXFW
WKHDJJUHJDWHDJHQWVijIRUHFDVWDVDZHLJKWHGDYHUDJHRIIRUHFDWVWIURPWKHWZRDERYH
DSSURDFKHVDVLQ0XWR
&


 &


 &




where m
Z
i
LVWKHDJJUHJDWHSULYDWHVHFWRUIRUHFDVWRIWKHYDULDEOHm
i
m
Z
ei
VWDQGVIRUWKHIRUHFDVW
EDVHGRQDGGLWLRQDOSURMHFWLRQGDWDDQGm
Z
bi
GHQRWHVWKHIRUHFDVWEDVHGRQNQRZLQJWKH
([SHFWDWLRQV
:25.,1*3$3(51R
13
3
PRGHOLHDQG+DYLQJQRGLUHFWPHDVXUHRISZHGHFLGHGWRWDNHDFRQVHUYDWLYH
DSSURDFKDQGDVVXPHGIRURXUEHQFKPDUNVSHFLILFDWLRQWKDWRQO\RIDJHQWVNQRZWKH
PRGHOZKLOHXVHWKHSURMHFWLRQWRDXJPHQWWKHLUGDWDVHWLHe :HFKHFNWKH
UREXVWQHVVRIRXUUHVXOWVIRUGLIIHUHQWYDOXHVRIe.
The third variant K(DVVXPHVIXOONQRZOHGJHRQWKHVLGHRIHFRQRPLFDJHQWV7KLV
VHWXSZLWKQRDV\PPHWULFLQIRUPDWLRQPD\EHUHJDUGHGDVUHIHUULQJWRDFHQWUDOEDQN
SXEOLVKLQJLWVIRUHFDVWHGSDWKRIIXWXUHSROLF\UDWHVWRJHWKHUZLWKDPDFURHFRQRPLF
IRUHFDVWFRQGLWLRQDORQWKLVSDWK7KHSXEOLFFDQWKHQXVHGLUHFWO\WKHFHQWUDOEDQNIRUHFDVW
DVLWVRZQ7HFKQLFDOO\DQGDUHVROYHGXQGHUUDWLRQDOH[SHFWDWLRQVZLWKWKHVDPH
timing assumptions as in K& and K'. As in K'LWLVDVVXPHGWKDWWKHFHQWUDOEDQNKDVIXOO

DQGFRUUHFWNQRZOHGJHRIWKHHFRQRP\DQGWKHPRGHOLWXVHVDQGSXEOLVKHVFRQVLVWLQJRI
HTXDWLRQVDQGLQGHHGGHSLFWVWKHDFWXDOODZRIPRWLRQRIWKHHFRQRP\
7KHLQIRUPDWLRQVWUXFWXUHRIWKHYDULDQWVGHVFULEHGDERYHLVVXPPDULVHGLQ
7DEOH:HLQWHUSUHWWKHJDLQVIURPJRLQJIURPK& to K' as corresponding to publishing
DPDFURHFRQRPLFSURMHFWLRQDQGWKHJDLQVIURPJRLQJIURPK' to K( as corresponding to
additionally showing an interest rate path.
Table 1
Information structure applied in the model
K& K' K(
central bank knows:
IS equation
Philips curve policy rule
IS equation
Philips curve policy rule
IS equation
Philips curve policy rule
public knows: –
)UDFWLRQŘe): IS equation,
Philips curve
Fraction e: projection
(additional data for
estimation)
IS equation
Philips curve policy rule
6LPXODWLRQVDQGUHVXOWV
National Bank of Poland
14
4
4
6LPXODWLRQVDQGUHVXOWV

4.1 Simulations
:HUXQVWRFKDVWLFVLPXODWLRQVLQRUGHUWRFRPSDUHFHQWUDOEDQNORVVHVXQGHUGLIIHUHQW
VWDJHVRIWUDQVSDUHQF\GLVFXVVHGDERYH(DFKVLPXODWLRQUXQVSDQVRYHUI
h^b
SHULRGVIRU
ZKLFKWKHYDOXHVRI
P
j and ^DUHFRPSXWHG:HWDNHI
h^b
DQGEXUQWKHILUVW
W LQLWLDOIRUZHFRQVLGHUWKHPEHLQJWRRPXFKGHSHQGHQWRQLQLWLDOFRQGLWLRQV:H
DQDO\VHWKUHHVLPXODWLRQFDVHVHDFKZLWKGLIIHUHQWSROLF\UXOHFRHIILFLHQWVDFFRUGLQJWRWKH
FODVVLILFDWLRQSUHVHQWHGLQVHFWLRQ,QDWKHRUHWLFDOVHWXSDFFRUGLQJWRFHQWUDOEDQN
ORVVLVFRPSXWHGRYHUWKHLQILQLWHKRUL]RQ,QVLPXODWLRQVZHUHVWULFWWKHKRUL]RQWR] 
periods ahead since
B
]
LVLQVLJQLILFDQWO\GLIIHUHQWIURP]HUR
8
IRUKLJKHUYDOXHVRI]6RWKH
central bank loss in period i is computed as:





=1




2
+
 

$
2
+
 


+
 
+1

2


0LQLPL]DWLRQRIWKHDYHUDJHFHQWUDOEDQNORVV$/WRSLFNWKHSROLF\UXOHFRHIILFLHQWV
IROORZV
HDI




 HDI








   




=+1



7KHPLQLPL]DWLRQLVSHUIRUPHGQXPHULFDOO\7KHLQLWLDOYHFWRUIRUK( is [
F
j

F
P
]=
>@7KHLQLWLDOYHFWRUIRUK& and K' is the argminUHDFKHGIRUK(.
$JHQWVFDQFKRRVHGLIIHUHQWVDPSOHOHQJWKVRISDVWGDWDIRUWKHSXUSRVHRIOHDUQLQJ,Q
the baseline scenario it is assumed that the learning sample smplVWUHWFKHVRYHUSHULRGV
\HDUVZKLFKFRUUHVSRQGV

to the perpetual learning gain
K
2USKDQLGHVDQG:LOOLDPV
ILQGWKDW
K
SHUIRUPEHVWLQPRGHOOLQJ63)H[SHFWDWLRQV7KH\DOVRUHSRUWWKDW
WKLVYDOXHLVLQOLQHZLWK6KHULGDQijVDQDO\VLVRIH[SHFWDWLRQVIURPWKH/LYLQJVWRQ6XUYH\GDWD

)RUWKHVDNHRIUREXVWQHVVZHDOVRDQDO\VHGLIIHUHQWYDOXHVRIsmpl,QWKHSURFHVVRIOHDUQLQJ
WKHUHJUHVVLRQVUXQE\DJHQWVDUHWHVWHGIRUVWDWLRQDULW\6KRXOGWKLVWHVWEHEUHDFKHGWKHPRGHOVij
FRHIILFLHQWVXVHGWRSURGXFHH[SHFWDWLRQVDUHVHWHTXDOWRWKHDYHUDJHRISDUDPHWHUVDSSOLHGLQ
WKHSUHYLRXVSHULRGV,QSUDFWLVHZHIRXQGWKLVUHVWULFWLRQELQGLQJRQO\ZLWKQHJOLJLEOHIUHTXHQF\
7KHPDLQSDUDPHWHUVDSSOLHGLQWKHEDVHOLQHVFHQDULRDUHVXPPDUL]HGLQ7DEOHEHORZ
4.2 Results
7KHUHVXOWVIRUWKHEDVHOLQHVFHQDULRDUHVXPPDULVHGLQ7DEOHVDQG,QRUGHUWR
HDVLO\FRPSDUHWKHJDLQVIURPSXEOLVKLQJWKHPDFURHFRQRPLFPRGHODQGIURPSXEOLVKLQJ
WKHSROLF\UXOHZHFDOFXODWHJDLQVGHILQHGDV


 




 

8
:HWDNH
B
7KHQ
B

y

K
=

ļ

i
XQGHUOHDVWVTXDUHVOHDUQLQJZLWKLQILQLWHPHPRU\
6LPXODWLRQVDQGUHVXOWV
:25.,1*3$3(51R
15
4
Table 2
Baseline scenario parametrization
hbea=80 e=0.8
G

K

D

S

S

P


S

j

S

^


B

W  I
h^bh

] 
L
j
=4
L
^

where <
^_
VWDQGVIRUJDLQLQYDULDQW^ versus variant _DQG6A
^
denotes average central bank
ORVVLQYDULDQWL7KHIROORZLQJILQGLQJVVWHPIURPWKHEDVHOLQHVFHQDULRVLPXODWLRQV
ľ&HQWUDOEDQNORVVGHFUHDVHVZKLOHPRYLQJIURP:HVWWR(DVWLQWKH7DEOHIRUDQ\
SROLF\UXOH7KLVLQGLFDWHVWKDWDGRSWLQJIXUWKHUWUDQVSDUHQF\VWDJHVSD\VRII
ľ,QDOOFDVHVJDLQVIRU
K' vs. K&DUHPXFKKLJKHUWKDQIRUK( vs. K'. This points to
EHQHILWVIURPSXEOLVKLQJPDFURHFRQRPLFSURMHFWLRQVEHLQJVXEVWDQWLDOO\KLJKHUWKDQ
JDLQVIURPDGGLWLRQDOO\VKRZLQJWKHIXWXUHLQWHUHVWUDWHSDWK)RULQVWDQFHXQGHUWKH
RSWLPL]HGSROLF\UXOH275SXEOLFDWLRQRIFRQGLWLRQDOIRUHFDVWLPSURYHVFHQWUDOEDQN
ORVVE\SHUFHQWFRPSDUHGWRLPSURYHPHQWRIRQO\SHUFHQWIROORZLQJWKH
SXEOLFDWLRQRIDQXQFRQGLWLRQDOSDWKRIIXWXUHLQWHUHVWUDWHV
ľ&RPSDULVRQRIFHQWUDOEDQNORVVHVXQGHUWKHUXOHRSWLPL]HGIRUUDWLRQDOH[SHFWDWLRQV
5(75DQGWKHRSWLPL]HGUXOH275FRQILUPVWKDWWKHFHQWUDOEDQNFDQEHQHILWIURP
RSWLPL]LQJWKHSROLF\UXOHFRHIILFLHQWVVXEMHFWWRWKHDJHQWVijDFWXDOLQIRUPDWLRQ)RU

H[DPSOHFRPSDUHWKHORVVIRUK&XQGHU5(756A DQG2756A 
ļDSSO\LQJWKHUXOHRSWLPL]HGXQGHUWKHDVVXPSWLRQRIDJHQWVIROORZLQJUDWLRQDO
H[SHFWDWLRQVIRUWKHDV\PPHWULFLQIRUPDWLRQFDVHK& can end up with disappointing
UHVXOWV,QGHHGHYHQWKHVWDQGDUG7D\ORUUXOH675SHUIRUPVEHWWHULQWKLVFDVH
6A 7KXVFHQWUDOEDQNVVKRXOGFRQVLGHUUHGHILQLQJSROLF\UXOHVWKH\IROORZ
ZKHQPRYLQJDORQJWKHODGGHURIWUDQVSDUHQF\VWDJHV
ľ7KHFRHIILFLHQWVRQLQIODWLRQDQGXQHPSOR\PHQWLQSROLF\UXOHGHFUHDVH

along the
:(GLUHFWLRQIRUWKHFDVHRIRSWLPL]HGSROLF\2757DEOH7KLVFDQEHLQWHUSUHWHG
DVDQHHGWROLPLWWKHQHFHVVDU\GHJUHHRIFHQWUDOEDQNUHVSRQVLYHQHVVRQFHDJHQWV
JHWPRUHLQIRUPDWLRQRQWKHHFRQRP\DQGFHQWUDOEDQNSUHIHUHQFHVLHZKHQ
WUDQVSDUHQF\LQFUHDVHV6XFKDUHVXOWLVFRQVLVWHQWZLWKWKHFRQFHSWRIXVLQJWKH
central bank communication channel as support to other transmission channels.
6RPHRIWKHVHUHVXOWVVLPSO\FRQILUPWKHUHVXOWVREWDLQHGLQRWKHUVWXGLHVHJ
2USKDQLGHVDQG:LOOLDPVRU5XGHEXVKDQG:LOOLDPV2XUPDLQFRQWULEXWLRQ
LVWKHUHVXOWWKDWJDLQVIURPGLVFORVLQJWKHSDWKRIIXWXUHLQWHUHVWUDWHE\FHQWUDOEDQNV
WKDWKDYHDOUHDG\HQJDJHGLQSXEOLVKLQJPDFURHFRQRPLFSURMHFWLRQVPD\EHORZHUWKDQ
WKRVHDFKLHYHGDIWHUHPEDUNLQJRQGLVFORVLQJPDFURSURMHFWLRQVDQGPDFURPRGHOVWKH\
DUHEDVHGRQ:HLJKWHGDJDLQVWIHDUVRIUHYHDOLQJIXWXUHLQWHUHVWUDWHSDWKWKLVPD\H[SODLQ
WKHUHOXFWDQFHRIFHUWDLQFHQWUDOEDQNVWRSXVKWKHLUWUDQVSDUHQF\IUDPHZRUNWKDWIDU
7RJHWDQLQVLJKWLQWRWKHUREXVWQHVVRIRXUUHVXOWVZHDOVRUXQWKHVLPXODWLRQVIRU
GLIIHUHQWOHQJWKVRIWKHSDVWGDWDVSDQhbeaWKDWDJHQWVXVHIRUOHDUQLQJIRUGLIIHUHQW
IUDFWLRQVeRIDJHQWVXVLQJPDFURHFRQRPLFSURMHFWLRQVSXEOLVKHGE\WKHFHQWUDOEDQNWR
HVWLPDWHWKHPRGHODQGDOVRIRUGLIIHUHQWYDULDQFHVRIVKRFNVWRWKHLQWHUHVWUDWHUXOH
S
Z
^
. To
HQDEOHFRPSDULVRQVDOOWKHUHPDLQLQJSDUDPHWHUVZHUHOHIWXQFKDQJHGDWWKHEHQFKPDUN

VFHQDULRYDOXHVLHGXULQJHDFKVLPXODWLRQRQO\WKHYDOXHRIhbeae or
S
Z
^
was altered. The
UDQJHRIhbeaXQGHUDQDO\VLVVSDQQHGIURPWRZLWKDVWHSRI,QFDVHRIeWKH
GRPDLQVWUHWFKHGIURPWRZLWKDVWHSDQGIRU
S
Z
^
ZHXVHGWKHYDOXHVRI
EHQFKPDUNDQG

:LWKWKHH[FHSWLRQRIFRHIILFLHQWRQXQHPSOR\PHQWLQK' vs. K(%XWWKHGLIIHUHQFHEHWZHHQWKHWZR
LVWLQ\DQGPD\VWHPIURPUDQGRPIOXFWXDWLRQVLQQXPHULFDOVLPXODWLRQVZHSHUIRUP
 



6LPXODWLRQVDQGUHVXOWV
National Bank of Poland
16
4
Table 3
Average central bank loss and gains in the baseline scenario
Case nick
Loss Gain (in per cent)
K& K' K( K' vs. K& K( vs. K'
Standard Taylor rule STR 95.85 82.83 80.92 13.59 2.30
rule optimized for RE

(variant V3)
RETR 121.62 78.83 76.77 35.18 2.62
optimized rule OTR 95.81 78.83 76.77 17.72 2.61
Table 4
Taylor rule coefficients in the baseline scenario
Case nick
Loss
K& K' K(
Standard Taylor rule STR
F
P
=1.5
F
j
Ř
F
P
=1.5
F
j
Ř
F
P
=1.5
F
j
Ř
rule optimized for RE
(variant V3)
RETR

F
P
=1.16
F
j
Ř
F
P
=1.16
F
j
Ř
F
P
=1.16
F
j
Ř
optimized rule OTR
F
P

F
j
Ř
F
P
=1.17
F
j

Ř
F
P
=1.16
F
j
Ř
5HVXOWVRIVLPXODWLRQV

DUHGHSLFWHGLQ)LJXUHVDQG$VWKHVDPSOHOHQJWKhbea
used by agents rises the central bank loss tends to be lower. This is in line with the intuition
WKDWXVLQJODUJHUGDWDVHWVE\DJHQWVHQDEOHVWKHPWREHWWHUDSSUR[LPDWHWKHWUXHODZRI
PRWLRQRIWKHHFRQRP\DQGWKXVORZHUFHQWUDOEDQNORVV$VUHJDUGVWKHIUDFWLRQeWKH
PRUHDJHQWVKDYHWRUHVRUWWRWKHPDFURHFRQRPLFSURMHFWLRQVSXEOLVKHGE\WKHFHQWUDO
EDQNWKHKLJKHUWKHYDOXHVRIFHQWUDOEDQNORVVDQGWKHKLJKHUWKHJDLQIURPGLVFORVLQJWKH
LQWHUHVWUDWHSDWK2QWKHRWKHUKDQGLWLVZRUWKQRWLQJWKDWVKRZLQJWKH,6DQG3&FXUYHV
WRDOODJHQWVe LVDOPRVWHTXLYDOHQWWRK(7KHDGGLWLRQDOJDLQVIURPSXEOLVKLQJWKH
LQWHUHVWUDWHSDWKEHFRPHQHJOLJLEOHLQWKLVFDVHZKLFKUHIOHFWVWKHIDFWWKHVROHHVWLPDWLRQ
RIWKH7D\ORUUXOHLVUHODWLYHO\XQSUREOHPDWLF$ULVLQJYDULDQFHRIWKHPRQHWDU\SROLF\VKRFN
S
Z
^
OHDGVWRKLJKHUYDOXHVRIDYHUDJHFHQWUDOEDQNORVVZKLFKDJDLQLVFRQVLVWHQWZLWK
LQWXLWLRQ+RZHYHULQDOOFDVHVWKHGLIIHUHQFHEHWZHHQK& and K' remains substantially
ODUJHUWKDQWKHGLIIHUHQFHEHWZHHQK' and K(7KLVFRQILUPVRXUPDLQILQGLQJWKDWWKH
JDLQVFHQWUDOEDQNVKDYHUHDSHGSXEOLVKLQJPDFURHFRQRPLFSURMHFWLRQVDUHODUJHUHODWLYHWR
the remaining gains that can be achieved by additionally showing the interest rate path.

:HDOVRFKHFNHG WZRDOWHUQDWLYH7D\ORUUXOHVHWWLQJVZLWKWKHFHQWUDOEDQNUHVSRQGLQJWRSHULRGi or
period iLQIODWLRQDQGXQHPSOR\PHQW7KHUHVXOWVUHPDLQHGFORVHWRWKRVHSUHVHQWHGLQWKHWH[W+RZHYHU

WKHVHPRGHOVWHQGHGWRH[KLELWLQGHWHUPLQDQF\GXULQJWKHRSWLPL]DWLRQSURFHVVLQ K'7KLVPD\UHIOHFW
FKDQJHVLQWKH7D\ORUSULQFLSOHXQGHUOHDUQLQJDVGHVFULEHGLDE\(XVHSLDQG3UHVWRQ
Conclusions
:25.,1*3$3(51R
17
5
5
Conclusions
,QWKLVSDSHUZHH[DPLQHGWKHUHODWLYHJDLQVIURPSXEOLVKLQJPDFURHFRQRPLF
SURMHFWLRQVDQGLQWHUHVWUDWHSDWKVE\FHQWUDOEDQNV2XUUHVXOWVZHUHEDVHGRQDVLPSOH
WKUHHHTXDWLRQPRGHOGHYHORSHGXQGHUWKHDVVXPSWLRQRILQIRUPDWLRQDV\PPHWU\EHWZHHQ
WKHSXEOLFDQGWKHFHQWUDOEDQN7KLVLQIRUPDWLRQJDSFDQEHILOOHGHLWKHUE\OHDUQLQJ
RQWKHVLGHRIWKHSXEOLFRUE\SXEOLVKLQJIRUHFDVWVPDFURHFRQRPLFRULQWHUHVWUDWHE\
WKHFHQWUDOEDQN2XUPRGHOVKRZVWKDWWKHJDLQVIURPSXEOLVKLQJWKHPDFURHFRQRPLF
SURMHFWLRQGRPLQDWHWKHJDLQVIURPDGGLWLRQDOO\SXEOLVKLQJWKHLQWHUHVWUDWHSDWK7KLVLQ
RXURSLQLRQUHIOHFWVWKHLQWXLWLRQWKDWLWLVUHODWLYHO\KDUGIRUDJHQWVWRIRUHFDVWHFRQRPLF
GHYHORSPHQWV+RZHYHURQFHWKH\KDYHDKLQWRQKRZWKHHFRQRP\LVH[SHFWHGWRPRYH
WKH\FDQUHODWLYHO\HDVLO\JXHVVZKDWZLOOKDSSHQWRLQWHUHVWUDWHVLQWKHQHDUIXWXUH
:HWKLQNWKDWWKLVPD\EHRQHRIWKHUHDVRQVIRUZK\LQIODWLRQWDUJHWLQJFHQWUDO
EDQNVRIZKLFKPRVWDOUHDG\SXEOLVKPDFURHFRQRPLFSURMHFWLRQVDUHUHODWLYHO\UHOXFWDQW
to start publishing interest rate paths. Although we strongly believe that most banks will
VRRQHURUODWHUIROORZWKHSDWKSDYHGE\WKH5HVHUYH%DQNRI1HZ=HDODQGDQGWKH1RUJHV
%DQNDQGVWDUWSXEOLVKLQJLQWHUHVWUDWHSURMHFWLRQVWKLVUHOXFWDQFHVHHPVV\PSWRPDWLFWR
XV,WPD\EHDVLJQWKDWFHQWUDOEDQNVLQWXLWLYHO\NQRZZKDWZHVKRZIRUPDOO\ļWKDW
PRVWJDLQVIURPVKRZLQJIRUHFDVWKDYHDOUHDG\EHHQUHDSHGE\SXEOLVKLQJPDFURHFRQRPLF
SURMHFWLRQV
7KLVZRUNOHDYHVDQXPEHURILVVXHVRSHQIRUIXUWKHULQYHVWLJDWLRQ2QHUHODWHVWRWKH
TXHVWLRQKRZWREHVWPRGHOWKHDGGLWLRQDONQRZOHGJHWKDWDJHQWVJHWIURPWKHFHQWUDO
EDQNVPDFURHFRQRPLFSURMHFWLRQV7KLVPD\UHTXLUHDGGLWLRQDOVWXGLHVRQWKHLQIRUPDWLRQ
FRQWHQWRIFHQWUDOEDQNSURMHFWLRQV

5HIHUHQFHV
National Bank of Poland
18
5HIHUHQFHV
&KRUWDUHDV*6WDVDYDJH'DQG6WHUQH*
'RHV,W3D\7R%H7UDQVSDUHQW"
,QWHUQDWLRQDO(YLGHQFHIURP&HQWUDO%DQN)RUHFDVWV
)HGHUDO5HVHUYH%DQNRI6W
/RXLV5HYLHZ-XO\$XJXVW
YDQGHU&UXLMVHQ&DQG(LMIILQJHU6
7KH(FRQRPLF,PSDFWRI&HQWUDO%DQN
7UDQVSDUHQF\$6XUYH\
&(35'LVFXVVLRQ3DSHUV
&XNLHUPDQ$
(VWDEOLVKLQJD5HSXWDWLRQIRU'HSHQGDELOLW\E\0HDQVRI,QIODWLRQ
Targets
LQ/DYDQ0DKDGHYDDQG*DEULHO6WHUQHHGV0RQHWDU\)UDPHZRUNVLQ
D*OREDO&RQWH[W/RQGRQ5RXWOHGJH
&XNLHUPDQ$DQG0HOW]HU$+
$7KHRU\RI$PELJXLW\&UHGLELOLW\DQG,QIODWLRQ
XQGHU'LVFUHWLRQDQG$V\PPHWULF,QIRUPDWLRQ
(FRQRPHWULFD
'HQQLV5DQG5DYHQQD)
Learning and Optimal Monetary Policy
)5%RI6DQ
)UDQFLVFR:RUNLQJ3DSHU1R
(KUPDQQ0DQG)UDW]VFKHU0How should central banks communicate?
(XURSHDQ&HQWUDO%DQN:RUNLQJ3DSHU1R1RYHPEHU
(XVHSL6DQG3UHVWRQ%
&HQWUDO%DQN&RPPXQLFDWLRQDQG([SHFWDWLRQV

6WDELOL]DWLRQ
PLPHR)HGHUDO5HVUYH%DQNRI1HZ<RUN
(YDQV*:DQG+RQNDSRKMD6
/HDUQLQJDQG([SHFWDWLRQVLQ0DFURHFRQRPLFV
.
3ULQFHWRQ8QLYHUVLW\3UHVV3ULQFHWRQ1HZ-HUVH\
(YDQV*:DQG+RQNDSRKMD6
0RQHWDU\3ROLF\([SHFWDWLRQVDQG&RPPLWPHQW

6FDQGLQDYLDQ-RXUQDORI(FRQRPLFV9RO
(YDQV*:DQG+RQNDSRKMD6
([SHFWDWLRQV/HDUQLQJDQG0RQHWDU\3ROLF\DQ
2YHUYLHZRI5HFHQW5HVHDUFK
%DQNRI)LQODQG5HVHDUFK'LVFXVVLRQ3DSHUV
(YDQV*:DQG0F*RXJK%
0RQHWDU\3ROLF\,QGHWHUPLQDF\DQG/HDUQLQJ

-RXUQDORI(FRQRPLF'\QDPLFVDQG&RQWURO
(YDQV*:DQG0F*RXJK%
,PSOHPHQWLQJ2SWLPDO0RQHWDU\3ROLF\LQ1HZ
Keynesian Models with Inertia
8QLYHUVLW\RI2UHJRQ'HSDUWPHQWRI(FRQRPLFV
:RUNLQJ3DSHU
)DXVW-DQG/HHSHU(0
)RUHFDVWVDQG,QIODWLRQ5HSRUWV$Q(YDOXDWLRQ
SUHSDUHG
IRUWKH6YHULJHV5LNVEDQNFRQIHUHQFHĴ,QIODWLRQ7DUJHWLQJ,PSOHPHQWDWLRQ
&RPPXQLFDWLRQDQG(IIHFWLYHQHVVĵ-XQH
)HUUHUR*6HFFKL$
7KH$QQRXQFHPHQWRI)XWXUH3ROLF\,QWHQWLRQV

IRUWKFRPPLQJ
LQ7HPLGL'LVFXVVLRQH%DQNRI,WDO\
)UDFDVVR$*HQEHUJ+:\SORV]&
+RZGR&HQWUDO%DQNV:ULWH"$Q(YDOXDWLRQ
RI,QIODWLRQ7DUJHWLQJ&HQWUDO%DQNVij*HQHYD5HSRUWVRQWKH:RUOG(FRQRP\

,&0%6*HQHYD
*HUDDWV30
Central bank transparency
(FRQRPLF-RXUQDO))
*HUDDWV30
7UDQVSDUHQF\DQG5HSXWDWLRQ7KH3XEOLFDWLRQRI&HQWUDO%DQN
Forecasts
7RSLFVLQ0DFURHFRQRPLFV
*HUVEDFK+
2QWKH1HJDW LYHV RFLDOYDOXHRIFHQWUDOE DQN ijVNQRZ OHGJHWUDQVSDUHQF\

(FRQRPLFVRI*RYHUQDQFHSS
5HIHUHQFHV
:25.,1*3$3(51R
19
*LDQQRQL03DQG:RRGIRUG0
2SWLPDO,QIODWLRQ7DUJHWLQJ5XOHVLQ
ĵ7KH
,QIODWLRQ7DUJHWLQJ'HEDWHĵ%HQ%HUQDQNHDQG0LFKDHO:RRGIRUGHGV&KLFDJR
8QLYHUVLW\RI&KLFDJR3UHVV
*RRGIULHQG0
0RQHWDU\0\VWLTXH6HFUHF\DQG&HQWUDO%DQNLQJ
-RXUQDORI
0RQHWDU\(FRQRPLFV

*RRGKDUW&$(
0RQHWDU\7UDQVPLVVLRQ/DJVDQGWKH)RUPXODWLRQRIWKH3ROLF\
Decision on Interest Rates
)HGHUDO5HVHUYH%DQNRI6W/RXLV5HYLHZ-XO\$XJXVW

*RVVHOLQ3/RW]$:\SORV]&The Expected Interest Rate Path: Alignment
of Expectations vs. Creative Opacity,QWHUQDWLRQDO-RXUQDORI&HQWUDO%DQNLQJ

.DKQ*$
&RPPXQLFDWLQJDSROLF\SDWKWKHQH[WIURQWLHULQFHQWUDOEDQN
transparency?
)HGHUDO5HVHUYH%DQNRI.DQVDV&LW\(FRQRPLF5HYLHZ4
.LQJ0
7KH03&7HQ<HDUV2Q
/HFWXUHGHOLYHUHGWRWKH6RFLHW\RI%XVLQHVV
(FRQRPLVWV0D\
0RUULV6DQG6KLQ+6Social value of public information7KH$PHULFDQ(FRQRPLF
5HYLHZ
0XWR,
0RQHWDU\3ROLF\DQG/HDUQLQJIURPWKH&HQWUDO%DQNijV)RUHFDVW
'LVFXVVLRQ
3DSHU1R(%DQNRI-DSDQ
2USKDQLGHV$DQG:LOOLDPV-&
5REXVW0RQHWDU\3ROLF\ZLWK,PSHUIHFW
Knowledge
(&%:RUNLQJ3DSHU
3HHN-5RVHQJUHQ(6DQG7RRWHOO*0%
Does the Federal Reserve Have an
,QIRUPDWLRQDO$GYDQWDJH"<RX&DQ%DQNRQ,W
:RUNLQJ3DSHU1R)HGHUDO

5HVHUYH%DQNRI%RVWRQ$SULO
5RPHU&'DQG5RPHU'+
)HGHUDO5HVHUYH,QIRUPDWLRQDQGWKH%HKDYLRURI
Interest Rates
$PHULFDQ(FRQRPLF5HYLHZ-XQHSS
5XGHEXVFK*'
3XEOLVKLQJ&HQWUDO%DQN,QWHUHVW5DWH)RUHFDVWV
)HGHUDO5HVHUYH
%DQNRI6DQ)UDQFLVFR(FRQRPLF/HWWHU-DQXDU\
5XGHEXVFK*'DQG:LOOLDPV-&
5HYHDOLQJWKH6HFUHWVRIWKH7HPSOH7KH9DOXH
RI3XEOLVKLQJ&HQWUDO%DQN,QWHUHVW5DWH3URMHFWLRQV
)HGHUDO5HVHUYH%DQNRI6DQ
)UDQFLVFR:RUNLQJ3DSHU
6LPV&$
6ROYLQJ/LQHDU5DWLRQDO([SHFWDWLRQV0RGHOV
&RPSXWDWLRQDO(FRQRPLFV
9ROXPH1XPEHUVSS
6PHWV)DQG:RXWHUV5
6KRFNVDQG)ULFWLRQVLQ86%XVLQHVV&\FOHVD%D\HVLDQ
'6*($SSURDFK
$PHULFDQ(FRQRPLF5HYLHZ
6KHULGDQ1
)RUPLQJ,QIODWLRQ([SHFWDWLRQV
-RKQ+RSNLQV8QLYHUVLW\PLPHR
April.
7DUNND-DQG0D\HV'
7KH9DOXHRI3XEOLVKLQJ2IILFLDO&HQWUDO%DQN)RUHFDVWV

%DQNRI)LQODQG'LVFXVVLRQ3DSHU

7D\ORU-RKQ%
Discretion versus Policy Rules in Practice
&DUQHJLH5RFKHVWHU
&RQIHUHQFH6HULHVRQ3XEOLF3ROLF\'HFHPEHU
:DOVK&(Optimal Economic Transparency,QWHUQDWLRQDO-RXUQDORI&HQWUDO
%DQNLQJ
GH:DOTXH*DQG:RXWHUV5
$Q2SHQ(FRQRP\'6*(0RGHO/LQNLQJWKH(XUR
$UHDDQGWKH86(FRQRP\
PLPHR1DWLRQDO%DQNRI%HOJLXP
5HIHUHQFHV
National Bank of Poland
20
:HEHU$
+RZVKRXOGFHQWUDOEDQNVVLJQDOWKHLULQWHQWLRQVUHJDUGLQJIXWXUH
interest rates?
SUHVHQWDWLRQDW&)6FRQIHUHQFHĵ7KH(&%DQGLWVZDWFKHUV,;ĵ
6HSWHPEHU
:HOW]3
$VVHVVLQJSUHGHWHUPLQHGH[SHFWDWLRQVLQWKHVWDQGDUGVWLFN\SULFHPRGHO
D%D\HVLDQDSSURDFK
(&%:RUNLQJ3DSHU)UDQNIXUW
:RRGIRUG0
Interest and Prices
3ULQFHWRQ8QLYHUVLW\3UHVV3ULQFHWRQ
$SSHQGL[
:25.,1*3$3(51R
21
$SSHQGL[
%HORZZHSUHVHQWWKHUHVXOWVRIUREXVWQHVVFKHFNV

Figure 1
Average central bank loss for different values of hbea under various monetary policy rules
Figure 2
Average central bank loss for different values of e under various monetary policy rules
40 60 80 100 120 140 160
80
85
90
95
100
105
110
average central bank loss
STR
40 60 80 100 120 140 160
75
85
95
105
115
125
average central bank loss
RETR
40 60 80 100 120 140 160
75
80
85
90
95
100

105
110
smpl
smpl
smpl
average central bank loss
OTR
V1 V2
V3
40 60 80 100 120 140 160
80
85
90
95
100
105
110
average central bank loss
STR
40 60 80 100 120 140 160
75
85
95
105
115
125
average central bank loss
RETR
40 60 80 100 120 140 160
75

80
85
90
95
100
105
110
smpl
smpl
smpl
average central bank loss
OTR
V1 V2
V3
0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1
80
85
90
95
100
105
110
average central bank loss
STR
p
0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1
80
85
90
95

100
105
110
average central bank loss
STR
p
$SSHQGL[
National Bank of Poland
22
Figure 3
Average central bank loss for different values of
S
Z
^
under various monetary policy rules
0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1
60
80
100
120
140
160
average central bank loss
RETR
0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1
70
80
90
100
110

120
130
p
p
average central bank loss
OTR
V1 V2 V3
0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1
60
80
100
120
140
160
average central bank loss
RETR
0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1
70
80
90
100
110
120
130
p
p
average central bank loss
OTR
V1 V2 V3
0.1 0.15 0.2 0.25 0.3 0.35 0.4 0.45 0.5

80
85
90
95
100
105
110


i



i



i

average central bank loss
STR
V1 V2 V3
0.1 0.15 0.2 0.25 0.3 0.35 0.4 0.45 0.5
60
80
100
120
140
160
average central bank loss

RETR
0.1 0.15 0.2 0.25 0.3 0.35 0.4 0.45 0.5
70
80
90
100
110
120
average central bank loss
OTR
0.1 0.15 0.2 0.25 0.3 0.35 0.4 0.45 0.5
80
85
90
95
100
105
110


i



i



i


average central bank loss
STR
V1 V2 V3
0.1 0.15 0.2 0.25 0.3 0.35 0.4 0.45 0.5
60
80
100
120
140
160
average central bank loss
RETR
0.1 0.15 0.2 0.25 0.3 0.35 0.4 0.45 0.5
70
80
90
100
110
120
average central bank loss
OTR

$SSHQGL[
:25.,1*3$3(51R
23
$SSHQGL[
7KLVDSSHQGL[SUHVHQWVWKHVWDWHVSDFHUHSUHVHQWDWLRQRIWKHPRGHOXVHGLQWKHSDSHU


 

1
 

+1
 $


 

$

 $
1
 $

+1
 


 

+1




 


1

 

$
1
 


ZKHUHH[SHFWDWLRQVDUHDVVXPHGWREHIRUPHGDWiŞ
7KHPDWUL[UHSUHVHQWDWLRQRIWKHPRGHOLV
X
0
"

X
1
"
1





where:
•
h is the state vector:
h
i
=[^
i


P
i
j
i

P

i
j

i

P

i
j

i
^

i
@ij
with
P

i
j

i
and ^


i
EHLQJDUWLILFLDOYDULDEOHVVWDQGLQJIRULQIODWLRQXQHPSOR\PHQW
and interest rate in period iH[SHFWHGDWSHULRGi:
i
P
i
:
i
j
i
:
i
^
i
DQG
P

i
j

i
VWDQGLQJIRULQIODWLRQDQGXQHPSOR\PHQWLQSHULRGiH[SHFWHGDWSHULRGi:
i
P
i

:
i
j

i

•
E
i
=[
E
^i

E
P
i

E
ji
@ijLVDYHFWRURIVKRFNV
•
H
i
=[
H
i
P


H
i
P



H
i
j


H
i
j


H
i
^

@ijLVDYHFWRURIHQGRJHQRXVH[SHFWDWLRQDOHUURUVDV
LQWURGXFHGE\6LPV


 
1
1
 

1


where

1


 


+1


1

 
2
1
 

2


where

2

 


+2

$

 $
1
1

 

1


where
$
1

 

$
+1

$
1

 $
2
1
 

2


where
$
2

 


$
+2



 
1
1
 

1


where

1

 


+1

• and the matrices
'
0
'

9 and 0DUHGHILQHGDVIROORZV
X

0





















$


1

$
1



2

$
2


1




























$SSHQGL[
National Bank of Poland
24
X
1


















1


1
$
1

1
1
$
1
1

2
1
&
2
1

1
1
 




  
    
   
   
   
   
   
























































































1



2




1



2



1




























7KLVPRGHOUHSUHVHQWDWLRQLVHTXLYDOHQWWRWKDWGHVFULEHGE\6LPVDQGFDQEH
solved using his algorithm.