scholarly journals Central Bank Communication and Monetary Policy Predictability under Uncertain Economic Conditions

2019 ◽  
Vol 8 (2) ◽  
pp. 5-32
Author(s):  
Jonne O. Lehtimäki ◽  
Marianne Palmu
Keyword(s):  
Monetary Policy ◽  
Financial Crisis ◽  
Central Bank ◽  
Policy Instrument ◽  
Central Banks ◽  
Short Term ◽  
Policy Makers ◽  
The Public ◽  
Central Bank Communication ◽  
Monetary Policy Transparency

Abstract Modern central banks increasingly value monetary policy transparency, and attempt to build credibility by communicating their decisions to the public. This paper studies whether the communication of central banks can be used to explain upcoming changes in their most important monetary policy instrument, the short-term refinancing rate, and whether the public can trust central bank communication during times of financial crisis. This is done by constructing an indicator to measure the predictability of monetary policy by calculating the median of the policy makers’ official comments. The performance of this indicator is studied with ordered probit methods. The results show that predictability was reached relatively well at central bank level during the financial crisis despite the rapid growth of economic uncertainty, and that communication can be a useful tool for central banks during uncertain times.

Central Bank Communication

2019 ◽  
pp. 230-262
Author(s):  
Jakob de Haan ◽  
Jan-Egbert Sturm
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Central Banks ◽  
Inflation Expectations ◽  
Short Term ◽  
The Public ◽  
Central Bank Communication ◽  
Forward Guidance ◽  
The World ◽  
Future Direction

Many central banks in the world nowadays regard their external communication as an important tool to achieve their goals. This chapter provides an overview of the different ways in which central banks inform the public about the future direction of monetary policy and how successful they have been in recent years. Forward guidance is either part of a monetary policy strategy in which an explicit inflation target is targeted or is part of a strategy that attempts to circumvent the effective lower bound regarding the nominal interest rate. In both cases, forward guidance attempts to influence longer-term interest rates and inflation expectations through the expected future short-term interest rates.

scholarly journals A Text Mining Analysis of Central Bank Monetary Policy Communication in Nigeria

2020 ◽  
pp. 73-107
Author(s):  
Mohammed M. Tumala ◽  
Babatunde S. Omotosho
Keyword(s):  
Monetary Policy ◽  
Text Mining ◽  
Central Bank ◽  
Communication Strategy ◽  
Central Bank Communication ◽  
Monetary Policy Committee ◽  
Textual Data ◽  
Policy Communication ◽  
Policy Objectives ◽  
Monetary Policy Transparency

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.

scholarly journals Comparison of the Approach of the Czech National Bank and the European Central Bank to the Effects of the Global Financial Crisis

2021 ◽  
Vol 10 (2) ◽  
pp. 18-46
Author(s):  
Andrea Cecrdlova
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Financial Crisis ◽  
Central Bank ◽  
European Central Bank ◽  
Global Financial Crisis ◽  
Central Banks ◽  
European Central ◽  
National Bank ◽  
The Global Financial Crisis

The latest global crisis, which fully erupted in 2008, can have a significant impact on central banks credibility in the long run. During the last crisis, monetary authorities encountered zero interest rate levels and, as a result, started to use non-standard monetary policy instruments. The Czech National Bank decided to use a less standard instrument in November 2013, when it started to intervene on the foreign exchange market in order to keep the Czech currency at level 27 CZK / EUR. However, the European Central Bank also adopted a non-standard instrument, when chose a path of quantitative easing in 2015 in order to support the euro area economy by purchasing financial assets. The question remains whether the approach of Czech National Bank or the approach of European Central Bank in the crisis and post-crisis period was a more appropriate alternative. With the passage of time from the global financial crisis, it is already possible to compare the approaches of these two central banks and at least partially assess what approach was more appropriate under the given conditions. When comparing the central banks approaches to the crisis, the Czech National Bank was better, both in terms of the rate of interest rate cuts and the resulting inflation with regard to the choice of a non-standard monetary policy instrument. The recent financial crisis has revealed the application of moral hazard in practice, both on behalf of the European Central Bank and the Czech National Bank, which may have a significant impact on their credibility and independence in the coming years.

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

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

scholarly journals Over- and Underbidding in Central Bank Open Market Operations Conducted as Fixed Rate Tender

2005 ◽  
Vol 6 (1) ◽  
pp. 95-130 ◽  
Author(s):  
Ulrich Bindseil
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Interest Rates ◽  
Banking System ◽  
Central Banks ◽  
General Question ◽  
Open Market ◽  
Short Term ◽  
Fixed Rate ◽  
Proposed Model

Abstract Open market operations play a key role in allocating central bank funds to the banking system and thereby in steering short-term interest rates in line with the stance of monetary policy. Many central banks apply so-called ‘fixed rate tender’ auctions in their open market operations. This paper presents, on the basis of a survey of central bank experience, a model of bidding in such tenders. In their conduct of fixed rate tenders, many central banks faced specifically an ‘under-’ and an ‘overbidding’ problem. These phenomena are revisited in the light of the proposed model, and the more general question of the optimal tender procedure and allotment policy of central banks is addressed.

The czech experience with inflation targeting in transition

2000 ◽  
Vol 9 (3) ◽  
Author(s):  
Kateřina Šmídková ◽  
Miroslav Hrnčíř
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Inflation Targeting ◽  
Central Banks ◽  
Communication Strategy ◽  
The Other ◽  
Short Term ◽  
Countries In Transition ◽  
The One

This paper argues that inflation targeting is a strategy that can be under certain conditions adopted by central banks in countries in transition even though their typical goal is to disinflate instead of stabilising low inflation. On the one hand, according to the Czech experience, inflation targeting offers several benefits, such as increasing control over expectations and short-term flexibility of monetary strategy, that are attractive for economy in transition. On the other hand, constraints imposed by period of transition as well as by openness of economy are present no matter which monetary strategy is chosen by the central bank. Implied costs should not be attributed to a particular monetary strategy. Inflation targeting has made various factors constraining monetary policy more visible and, as a result, requirements on the quality of decisions as well as on communication strategy have increased.

scholarly journals Short-term deviations from monetary policy commitment in a monetary union: the degrees of freedom of an independent central bank

2016 ◽  
Author(s):  
Muriel Dal-Pont ◽  
Dominique Torre ◽  
Elise Tosi
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Monetary Union ◽  
Degrees Of Freedom ◽  
Real Income ◽  
Central Banks ◽  
Political Authority ◽  
Short Term ◽  
Distributed Information ◽  
Transmission Channels

The paper presents a model analyzing the degrees of freedom of an independent but committed Central Bank within a monetary union. In the model, interactions between Agents, Supranational Political Authorities and the Central Bank of the Union determine the current nominal and real outcomes. Imperfectly distributed information on shocks affecting supply, transmission channels and short-term expectations create opportunities for a Central Bank to deviate from its announced objective. This opportunity to deviate especially applies to Central Banks free from any kind of inflationary bias and committed to a strictly nominal target. Under certain conditions we show that nominal deviations from stated targets are not observable either by Agents or the Supranational Political Authority that periodically selects the membership of the Council of Monetary Policy of the Bank. Those deviations increase the variance of nominal values but dampen fluctuations of real income. Our results confirm, within a monetary union, the position defended by Cukierman and Metzler concerning the efficiency of a Central Bank’s ambiguous behaviour.

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

2008 ◽  
Vol 46 (4) ◽  
pp. 910-945 ◽  
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.

scholarly journals Monetary Policy Transparency

2014 ◽  
pp. 67-97
Author(s):  
Petra Geraats
Keyword(s):  
Monetary Policy ◽  
Private Sector ◽  
Central Bank ◽  
Conceptual Framework ◽  
Empirical Evidence ◽  
Central Banks ◽  
Empirical Measures ◽  
Forward Guidance ◽  
The World ◽  
Monetary Policy Transparency

This chapter examines transparency as a key feature of monetary policymaking by central banks around the world. It begins by presenting a conceptual framework for transparency and reviewing empirical measures, practices, and trends in monetary policy transparency. It then looks at theory regarding macroeconomic transparency as well as relevant empirical evidence. It also considers two ways in which monetary policy has become more transparent: the publication of macroeconomic forecasts and analysis and the disclosure of forward guidance about policy actions. The chapter illustrates how transparency allows the private sector to align its expectations with those of the central bank, making monetary policy more effective in the process.

scholarly journals Central Bank Communications and the General Public

2018 ◽  
Vol 108 ◽  
pp. 578-583 ◽  
Author(s):  
Andrew Haldane ◽  
Michael McMahon
Keyword(s):  
Central Bank ◽  
Experimental Evidence ◽  
General Public ◽  
Central Banks ◽  
The Public ◽  
Central Bank Communication ◽  
Bank Of England ◽  
The Revolution

Despite the recent revolution in central bank communication, it is unclear the general public have benefitted from these enhanced central bank communications. We first analyze the growth of communication and some reasons that the public may have missed the revolution. We then discuss the desirability of greater communication with the public. The case for feasibility of such communication examines observational and experimental evidence following the recently adopted use of a layered communication at the Bank of England. We find that, while more research is needed, there are compelling reasons for central banks to continue trying to target communication at the public.

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