Abstract

ANZOATEGUI ZAPATA, Juan Camilo  and  GALVIS CIRO, Juan Camilo. The Communication Effects on Inflation Forecast Errors: Empirical Evidence from Colombia for the period 2008-2016. Rev. mex. econ. finanz [online]. 2019, vol.14, n.4, pp.617-631.  Epub Feb 21, 2020. ISSN 2448-6795.  https://doi.org/10.21919/remef.v14i4.322.

This paper aims to examine the effects of the central bank’s communication on inflation forecasting errors for Colombia in the 2008-2016 period. The empirical evidence is composed of: i) The estimation of an EGARCH model, ii) useof VAR models; and iii) variance decomposition analysis. The results show that monetary policy announcements generate important effects on forecasting errors. The main policy recommendation is that central bank communication is a monetary policy tool to reduce forecast errors. In particular, communication has the potential to achieve a convergence between inflation expectations and inflation target. The main limitation is related to the lack of more disaggregated information on inflation expectations. This does not allow analyzing their reaction to different macroeconomic news. The originality of the paper consists in analyzing the inflation forecast errors based on the compensated inflation of the public debt securities.

Keywords : Central Bank Communication; Forecasting errors; Monetary Policy; E52; E58; E63.

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