2024-02-05
The Bank of Lithuania announced the winners of the Vladas Jurgutis Award for scientific research works. The €10,000 Vladas Jurgutis Award was granted to Simas Kučinskas and Artūras Juodis for their research on an innovative system for noise quantification in economic expectations.
In their paper “Quantifying noise in survey expectations” the researchers evaluate the level of noise in inflation forecasts by applying econometric methods. Previous research has almost exclusively analysed the bias of predictions, i.e. systemic errors, whereas in this work Juodis and Kučinskas show that noise – non-systemic errors – is as important as systemic errors and accounts for up to 30% of all inflation forecast errors.
“We believe that our research insights are directly relevant to the central banking and economic policy discourse. Our model increases the accuracy of macroeconomic projections, which is a crucial component in an effective monetary policy. Moreover, by separating noise from bias and a difference of opinion among market players, central banks can assess risks more accurately,” says Artūras Juodis.
According to Kučinskas, the conclusions of their research allow for more accurate monetary and macroprudential interventions, as the method helps to distinguish the effects of noise. In addition to that, understanding the role of noise can help central banks improve communication methods. This, in turn, helps to better manage public and market expectations.
The Vladas Jurgutis Award (€10,000) is granted for significant scientific research works of Lithuanian economists or foreign economists linked with Lithuanian education institutions carried out within the last five years – published scientific papers, monographs or other books. There is also the Bank of Lithuania Award for Dissertation in the Field of Economics (€5,000). It is granted to honour the authors of the best dissertations in economics or related fields, defended during the last two years up to 1 August of the current year.