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European Economists: High Marks to BSP for Clear and Comprehensive Inflation Report


The Bangko Sentral ng Pilipinas' quarterly Inflation Report (IR) received high marks in a study released in May 2003 by the Geneva-based Centre for Economic Policy Research (CEPR) which conducted an evaluation on how inflation-targeting central banks communicate their monetary policy strategy through the Inflation Report.

The study, conducted by CEPR economists Andrea Fracasso, Hans Genberg and Charles Wyplosz, evaluated the IRs of 20 inflation-targeting central banks according to the following criteria:

  • how convincing their Inflation Report is judged to be;
  • how well the central bank’s level of expertise comes through in the report;
  • the completeness of the Inflation Report;
  • the clarity of the writing style;
  • the quality and comprehensiveness of the information provided; and
  • whether or not the report is intimidating to economists or non-economists.

The BSP shifted its monetary policy framework from monetary aggregate targeting to inflation targeting only in January 2002. Since then, it has received positive feedback from various institutions, such as the Bank of England and the International Monetary Fund on its successful shift to inflation targeting.

The BSP's IR was ranked number 11 in the study, ahead of more experienced inflation targeters such as Canada, Australia, Israel and Peru.

The overall ranking of the Inflation Reports is as follows:  

  1. United Kingdom
  2. New Zealand
  3. Brazil
  4. Thailand
  5. Chile
  6. Czech Republic
  7. Iceland
  8. Norway
  9. Sweden
  10. South Korea
  1. Philippines
  2. Israel
  3. Canada
  4. Mexico
  5. Hungary
  6. Switzerland
  7. Poland
  8. South Africa
  9. Australia
  10. Peru
This study, published as part of the ICMB/CEPR series of papers entitled Geneva Reports on the World Economy, offers the first in-depth analysis and evaluation of 20 inflation reports. The CEPR study said: "If inflation targeting offers a precise framework, its policy implications are surprisingly imprecise. For the strategy to be understood and generally supported, inflation targeting central banks need to communicate clearly and precisely...The acid test of communication must be whether 'good' inflation reports lead to a better understanding of monetary policy decisions. For this to be the case, it must be that central banks that achieve consistently high ratings are more predictable than those with less appreciated reports.

The authors observe that well-produced Inflation Reports contribute to better public understanding and predictability of monetary policy. IRs are considered important to the inflation targeting process as they serve as the main document for articulating the central bank's monetary policy strategy. The Inflation Report is thus an essential component of an inflation targeting central bank’s overall communication strategy and is a key feature of good monetary policymaking.

A good IR has three main elements: an analysis of the current situation; a forecast of the inflation rate, along with the associated uncertainty; and an explanation of how the Monetary Policy Committee interprets current evidence and forecasts. The BSP IR scored particularly well in terms of the clarity and readability of the text as well as the comprehensiveness of the information presented in the report.

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