Does central bank communication signal future monetary policy in a (post)-crisis era? The case of the ECB

This paper employs text-mining techniques to analyse the communication strategy of the Central Bank of Nigeria (CBN) during the period 2004-2019. Since the policy communique released after each meeting of the CBN’s monetary policy committee (MPC) represents an important tool of central bank communication, we construct a corpus based on 87 policy communiques with a total of 123, 353 words. Having processed the textual data into a form suitable for analysis, we examined the readability, sentiments, and topics of the policy documents. While the CBN’s communication has increased substantially over the years, implying increased monetary policy transparency; the computed Coleman and Liau readability index shows that the word and sentence structures of the policy communiques have become more complex, thus reducing its readability. In terms of monetary policy sentiments, we find an average net score of -10.5 per cent, reflecting the level of policy uncertainties faced by the MPC over the sample period. In addition, our results indicate that the topics driving the linguistic contents of the communiques were influenced by the Bank’s policy objectives as well as the nature of shocks hitting the economy per period.

Download Full-text

Do monetary policy transparency and central bank communication reduce interest rate disagreement?

Journal of Forecasting ◽

10.1002/for.2631 ◽

2019 ◽

Vol 39 (3) ◽

pp. 368-393

Author(s):

Ruttachai Seelajaroen ◽

Pornanong Budsaratragoon ◽

Boonlert Jitmaneeroj

Keyword(s):

Monetary Policy ◽

Interest Rate ◽

Central Bank ◽

Central Bank Communication ◽

Monetary Policy Transparency

Download Full-text

Central Bank Communication and Monetary Policy: A Survey of Theory and Evidence

10.3386/w13932 ◽

2008 ◽

Cited By ~ 200

Author(s):

Alan Blinder ◽

Michael Ehrmann ◽

Marcel Fratzscher ◽

Jakob De Haan ◽

David-Jan Jansen

Keyword(s):

Monetary Policy ◽

Central Bank ◽

Central Bank Communication

Download Full-text

Central Bank communication and the impact of public announcements of new monetary policy data on the reaction of foreign exchange and stock markets: evidence from Poland

Argumenta Oeconomica ◽

10.15611/aoe.2017.2.02 ◽

2017 ◽

Vol 2 (39) ◽

pp. 21-60

Author(s):

Janusz Brzeszczyński ◽

Jerzy Gajdka ◽

M.Kutan Ali

Keyword(s):

Monetary Policy ◽

Central Bank ◽

Foreign Exchange ◽

Stock Markets ◽

Central Bank Communication ◽

Public Announcements ◽

The Impact

Download Full-text

Inflation volatility, monetary policy signaling and clarity of the central bank communication

Journal of Economic Studies ◽

10.1108/jes-10-2017-0293 ◽

2019 ◽

Vol 46 (2) ◽

pp. 266-283 ◽

Cited By ~ 1

Author(s):

Rodolfo Nicolay ◽

Ana Jordânia de Oliveira

Keyword(s):

Monetary Policy ◽

Central Bank ◽

Emerging Economies ◽

Inflation Targeting ◽

Generalized Method Of Moments ◽

Emerging Economy ◽

Ordinary Least Squares ◽

Content Type ◽

Inflation Volatility ◽

Central Bank Communication

PurposeStudies about the determinants of the clarity of central bank communication are still scarce. To the authors’ knowledge, there are no studies regarding emerging economies. The purpose of this paper is to contribute to the literature in the following aspects: to analyze the determinants of the clarity of the central bank communication in an inflation targeting emerging economy; observe the influence of inflation volatility over the clarity; and observe the effect of the monetary policy signaling over the clarity.Design/methodology/approachThe work uses readability indexes to measure the clarity of central bank communication. The empirical analysis uses ordinary least squares and the Generalized Method of Moments with one- and two-step estimations.FindingsThe findings suggest the inflation volatility reduces the clarity of central bank communication. Moreover, the monetary policy signaling also affects the clarity, but the effect depends on the direction of the signal.Practical implicationsThis paper observes the determinants of the clarity considering an emerging economy environment. The clarity of central bank communications is an important tool to access transparency. Hence, the analysis of what determines the clarity of central bank communication is a debate about the level of transparency accessed by the central bank.Originality/valueThere are no studies about the determinants of the clarity of central bank communication in emerging economies. Moreover, the novelty are the effects of inflation volatility and monetary policy signaling over the clarity.

Download Full-text

Macroeconomic Effects of Central Bank Communication: Evidence from the Fed

STUDI ECONOMICI ◽

10.3280/ste2009-098001 ◽

2010 ◽

pp. 5-22

Author(s):

Carlo Rosa ◽

Tim Breitenstein

Keyword(s):

Monetary Policy ◽

Central Bank ◽

Policy Decisions ◽

Monetary Policy Shocks ◽

Federal Funds ◽

Central Bank Communication ◽

News Shock ◽

Policy Shocks ◽

The Difference ◽

Future Direction

This paper employs exogenous measures of monetary policy shocks directly derived from financial market information to investigate how the economy responds to the surprise component of monetary policy decisions as opposed to central bank announcements about future movements in the policy rate. We find that the U.S. economy strongly reacts to the news shock, the difference between what the central bank announces regarding the future direction of monetary policy and what the market expects it to announce. The responses of output and prices to the unexpected component of policy decisions regarding the federal funds target rate are weak and have implausible signs.

Download Full-text

Central Bank Communication and Monetary Policy: A Survey of Theory and Evidence

Journal of Economic Literature ◽

10.1257/jel.46.4.910 ◽

2008 ◽

Vol 46 (4) ◽

pp. 910-945 ◽

Cited By ~ 369

Author(s):

Alan S Blinder ◽

Michael Ehrmann ◽

Marcel Fratzscher ◽

Jakob De Haan ◽

David-Jan Jansen

Keyword(s):

Monetary Policy ◽

Central Bank ◽

Financial Markets ◽

Real World ◽

Communication Strategies ◽

Central Banks ◽

Communication Strategy ◽

Scholarly Literature ◽

Central Bank Communication ◽

Almost All

Over the last two decades, communication has become an increasingly important aspect of monetary policy. These real-world developments have spawned a huge new scholarly literature on central bank communication—mostly empirical, and almost all of it written in this decade. We survey this ever-growing literature. The evidence suggests that communication can be an important and powerful part of the central bank's toolkit since it has the ability to move financial markets, to enhance the predictability of monetary policy decisions, and potentially to help achieve central banks' macroeconomic objectives. However, the large variation in communication strategies across central banks suggests that a consensus has yet to emerge on what constitutes an optimal communication strategy.

Download Full-text

Central bank’s perception on inflation and inflation expectations of experts

Journal of Economic Studies ◽

10.1108/jes-07-2014-0116 ◽

2015 ◽

Vol 42 (6) ◽

pp. 1142-1158 ◽

Cited By ~ 2

Author(s):

Gabriel Caldas Montes ◽

Rodolfo Tomás da Fonseca Nicolay

Keyword(s):

Monetary Policy ◽

Central Bank ◽

Inflation Targeting ◽

Generalized Method Of Moments ◽

Ordinary Least Squares ◽

Response Analysis ◽

Inflation Expectations ◽

Content Type ◽

Vector Autoregressive ◽

Central Bank Communication

Purpose – Due to the fact that studies on central bank communication in emerging countries are still scarce and there are few studies related to the influence that central bank’s perspectives about the state of the economy have on inflation expectations in emerging economies, the purpose of this paper is to contribute to the literature in the following aspects: it proposes an indicator of the central bank’s perception of inflation based on the minutes of the COPOM meetings, and, it analyzes the influence of central bank communication on expert inflation expectations through such indicator. Design/methodology/approach – Due to the fact that the perception of the Central Bank of Brazil is not directly observable, it is measured through the fuzzy set theory by an indicator that captures the informational content of the minutes of the COPOM meetings. The empirical analysis uses ordinary least squares, the generalized method of moments and vector-autoregressive through impulse-response analysis. Findings – The findings suggest that the expectations of financial market experts react according to the content of the information provided by the central bank, i.e., announcements cause deterioration of expectations in times of instability, and reduce inflation expectations when inflation is controlled. The results also support the idea that the credibility of inflation targeting plays a key role in determining inflation expectations. Practical implications – This paper suggests a new approach on studies about central bank communication. The focus here is not on the effect of the announcements in terms of future monetary policy, but on the perception of the central bank in terms of inflation. This central bank’s perception reflects the optimistic or pessimistic view about the economic outlook and risk of inflation and this perception is considered by experts of financial markets. Originality/value – For Brazil, there are no studies about the influence of communication through the minutes of the Brazilian Monetary Policy Committee meetings on inflation expectations. The authors develop an indicator in order to measure central bank’s perception of inflation based on the minutes of COPOM meetings.

Download Full-text