Joachim Nagel: Dot plots for the Eurosystem?

Speech by Dr Joachim Nagel, President of the Deutsche Bundesbank, at Harvard University, Cambridge, 22 October 2024.

The views expressed in this speech are those of the speaker and not the view of the BIS.

Check against delivery 

1 Introduction

Ladies and gentlemen,

it is a great pleasure to be at Harvard again, to meet long time companions like Hans-Helmut Kotz and to exchange ideas with top scientists such as Benjamin Friedman. When I was in this round two years ago, we were dealing with an unprecedented global inflation spike. Fortunately, the worst is behind us, and inflation in the euro area is heading back to the Eurosystem's target. We have not brought the inflation ship safely back into the 2% harbour, but the port is in sight. Thus, I can focus on another question today.

Before I do that, let me share an analogy to set the stage for my discussion. Back in the 1970s and 1980s, the field of economics was split into two seemingly incompatible schools of thought: New Keynesian and New Classical. Their proponents were not too polite in their language, calling assumptions "foolishly restrictive" or comparing an opponent to someone attempting to pass himself off as Napoleon Bonaparte. But, over time, ideas from both camps ultimately merged to form a consensus called the New Neoclassical Synthesis, the very foundation of modern macroeconomics. Gregory Mankiw neatly described this story in his essay "The Macroeconomist as Scientist and Engineer".

The takeaway from this analogy is that complex issues are rarely black or white. With this in mind, I want to explore whether the conduct of monetary policy in the euro area could be enhanced by offering more detailed and nuanced information regarding its future outlook. More specifically, today I will address the following question: Should the Eurosystem introduce dot plots?