Quite an intresting discussion. My takes are: 1) it merits the focus on both central projection with an equal emphasis of alternative one or two scenarios; 2) it is an advantageous to communicate future policy rate path, and alternative endogenous policy rate path should the risks under scenarios materialise (accompanied by clear and concise baseline and scenario assumptions); 3) the modelling approach ought to be based on small central model that capture key macroeconomic linkages, with various specific satelite models for indept analysis of specific sectors and markets, "too" big model ought be avoided (this is an opposite of what Bernanke's suggestions); 4) judgements is equally important rather than mainly relying on model based projections, but judgements need to be framed within the model structure and interlinkages (the impression of Bernanke's report is as if the Bank of England rely solely on model based forecasting, which i sincerely do not think so, my guess is that the assumptions used for forecasting were inaccurate and were not adequately revised); 5) not withstanding the above, to note Goodhart's view that in no way one could measure likelihood and uncertainty of some risks such as political, fiscal and debt crisis risks (in other words, implicitly policy making would continue to be subject to unpredictably mistakes) 👌
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Financial Services Specialist| Private Sector Engagement| Enterprise Development| MSME Financing| Leadership| Development Research
This is interesting move, contrary to coercing banks with tools such as a credit growth cap, something unheard of before. Policy rates and OMOs are common tools although how they will regulate our unique financial markets is yet to be seen.
Professor of Economics and Finance at HELP University
11moThanks for bringing this interesting debate to our attention….. there is a lot to think about it