Sources of Disagreement in Inflation Forecasts: An International Empirical Investigation

Central to the conduct of monetary policy are inflation forecasts. Inflation forecast are not unique. Central banks and professional organizations generate inflation forecasts while households are surveyed about their inflation outlook. This paper estimates inflation forecast disagreement for nine economies over the 1999-2009 period, five of which target inflation. I find that central bank transparency tends to increase forecast disagreement. To the extent this reflects the attention paid to inflation performance the implication is that transparency is beneficial. Moreover, this finding does not appear to be a feature that applies only to central banks that must adhere to an inflation target.