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Article
Publication date: 23 September 2014

Peter T. Hughes and Stefan Kesting

This paper aims to review the economic literature on central bank communication to address the questions of how economists account for the effects of speech acts and…

Abstract

Purpose

This paper aims to review the economic literature on central bank communication to address the questions of how economists account for the effects of speech acts and whether and to what extent discourse analysis is applied in their studies. Moreover, whether there may be room for more linguistic approaches to analyse central bank communication is investigated.

Design/methodology/approach

A range of recently published (2004-2013) works in the area of central bank communication are critically scrutinized to highlight the current thinking in this area. The sources are organised into different sections, namely, communication in monetary policy theory; impacts of speech acts; optimizing central bank communication; and linguistic analysis of central bank communication.

Findings

The current literature is developing a coherent argument that central bank communication is an important part of monetary policy and that speech acts by the central bank do have impacts at the macroeconomic level. Linguistic analysis does have the potential to contribute to this literature, as little attention has been paid to the content of the speech acts.

Originality/value

This paper fulfils the need for an up-to-date review of the developing literature on central bank communication. This paper also provides support for linguistic analysis in this area.

Details

On the Horizon, vol. 22 no. 4
Type: Research Article
ISSN: 1074-8121

Keywords

Abstract

Details

Central Bank Policy: Theory and Practice
Type: Book
ISBN: 978-1-78973-751-6

Article
Publication date: 4 March 2019

Rodolfo Nicolay and Ana Jordânia de Oliveira

Studies about the determinants of the clarity of central bank communication are still scarce. To the authors’ knowledge, there are no studies regarding emerging economies…

Abstract

Purpose

Studies 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/approach

The 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.

Findings

The 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 implications

This 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/value

There 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.

Details

Journal of Economic Studies, vol. 46 no. 2
Type: Research Article
ISSN: 0144-3585

Keywords

Article
Publication date: 9 November 2015

Gabriel Caldas Montes and Rodolfo Tomás da Fonseca Nicolay

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…

Abstract

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.

Details

Journal of Economic Studies, vol. 42 no. 6
Type: Research Article
ISSN: 0144-3585

Keywords

Book part
Publication date: 12 November 2014

Camille Cornand and Frank Heinemann

In this article, we survey experiments that are directly related to monetary policy and central banking. We argue that experiments can also be used as a tool for central

Abstract

In this article, we survey experiments that are directly related to monetary policy and central banking. We argue that experiments can also be used as a tool for central bankers for bench testing policy measures or rules. We distinguish experiments that analyze the reasons for non-neutrality of monetary policy, experiments in which subjects play the role of central bankers, experiments that analyze the role of central bank communication and its implications, experiments on the optimal implementation of monetary policy, and experiments relevant for monetary policy responses to financial crises. Finally, we mention open issues and raise new avenues for future research.

Details

Experiments in Macroeconomics
Type: Book
ISBN: 978-1-78441-195-4

Keywords

Article
Publication date: 23 September 2014

Elke Muchlinski

The purpose of this paper is to explain why central banking as a practice needs to be based on everyday language and communication because a central bank must be able to…

250

Abstract

Purpose

The purpose of this paper is to explain why central banking as a practice needs to be based on everyday language and communication because a central bank must be able to act flexibly. The meaning of a central bank’s language and communication is not a linear transferred meaning from the sender to the receiver. Language is not the gateway to transmitting a pre-given meaning. Whereas the meaning of a coded language is rooted in a pre-defined system independent of changing environment and context, everyday language is not. Expectation-building cannot be anchored in an artificial system such as formal language, codes and deductive premises based on formal language. In guiding expectations of economic agents, a central bank is a part of its own context through the language it uses in both its communication and in its policy of information disclosure concerning its own risk assessment.

Design/methodology/approach

The paper explains the constitutive function of language for common understanding in central banking and monetary policy.

Findings

The paper contributes to the literature on central bank communication and transparency.

Originality/value

The interaction between the markets and the central bank is understandable within a particular history and context which also helps to build up or to restore confidence in monetary transactions and relations.

Details

On the Horizon, vol. 22 no. 4
Type: Research Article
ISSN: 1074-8121

Keywords

Article
Publication date: 7 September 2021

Janusz Brzeszczyński, Jerzy Gajdka, Tomasz Schabek and Ali M Kutan

This study contributes to the pool of knowledge about the impact of monetary policy communication of central banks on financial instruments' prices and assets' value in…

Abstract

Purpose

This study contributes to the pool of knowledge about the impact of monetary policy communication of central banks on financial instruments' prices and assets' value in emerging markets.

Design/methodology/approach

Empirical analysis is executed using the National Bank of Poland (NBP) announcements about its monetary policy covering the data from the broad financial market in its three main segments: stock market, foreign exchange market and bonds market. The reactions are measured relative to the changes in the NBP announcements and also with respect to investors' expectations. Autoregressive conditional heteroscedasticity (ARCH) models with dummy variables are used as the main methodological tool.

Findings

Bonds market and foreign exchange market are the most sensitive market segments, while interest rate and money supply are the most influential types of announcements. The changes of the revealed new macroeconomic figures had more impact on assets' prices movements than the deviations from their expectations. Moreover, greater diversity of the Monetary Policy Council (MPC) members' opinions on the voted motions, captured in the MPC voting reports, is associated with more cases of statistically significant NBP communication events.

Practical implications

The findings have direct relevance for fund managers, portfolio analysts, investors and also for financial market regulators.

Originality/value

The results provide novel evidence about how the emerging financial market responds to monetary policy announcements. They help understand the nature of the impact of public information on financial assets' valuation and on movements of their prices, analysed comprehensively in three market segments, in the emerging market environment.

Details

International Journal of Emerging Markets, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1746-8809

Keywords

Article
Publication date: 18 January 2013

Helder Ferreira de Mendonça and Ivando Faria

The purpose of this paper is to make an analysis of the Brazilian experience after the adoption of inflation targeting concerning the effects caused by the new practices…

Abstract

Purpose

The purpose of this paper is to make an analysis of the Brazilian experience after the adoption of inflation targeting concerning the effects caused by the new practices of transparency and communication in the monetary policy.

Design/methodology/approach

Changes in the financial market's expectations due to monetary policy actions are analyzed based on methodologies proposed by Cook and Hahn and Kuttner. Daily data from transactions in the interbank deposit futures market of the Securities, Commodities and Futures Exchange (BMF&BOVESPA) are used for the period July 1999‐January 2009. Two sub‐periods are also considered: the “maturation period” – the first phase of the effects caused by an increase in central bank transparency; and the “wisdom period” – the second phase in the financial market's perception regarding an environment with more transparency.

Findings

The findings are in consonance with the idea that an increase in central bank transparency and communication improves the efficiency of expectations hypothesis of the term structure of interest rate and the anticipation of changes in the interest rate target.

Originality/value

This study offers some new insights into how central bank communication improves the efficiency of the monetary policy for developing countries, which have adopted inflation targeting.

Details

Journal of Economic Studies, vol. 40 no. 1
Type: Research Article
ISSN: 0144-3585

Keywords

Book part
Publication date: 1 July 2015

Nikolay Markov

This chapter investigates the predictability of the European monetary policy through the eyes of the professional forecasters from a large investment bank. The analysis is…

Abstract

This chapter investigates the predictability of the European monetary policy through the eyes of the professional forecasters from a large investment bank. The analysis is based on forward-looking Actual and Perceived Taylor Rules for the European Central Bank which are estimated in real-time using a newly constructed database for the period April 2000–November 2009. The former policy rule is based on the actual refi rate set by the Governing Council, while the latter is estimated for the bank’s economists using their main point forecast for the upcoming refi rate decision as a dependent variable. The empirical evidence shows that the pattern of the refi rate is broadly well predicted by the professional forecasters even though the latter have foreseen more accurately the increases rather than the policy rate cuts. Second, the results point to an increasing responsiveness of the ECB to macroeconomic fundamentals along the forecast horizon. Third, the rolling window regressions suggest that the estimated coefficients have changed after the bankruptcy of Lehman Brothers in October 2008; the ECB has responded less strongly to macroeconomic fundamentals and the degree of policy inertia has decreased. A sensitivity analysis shows that the baseline results are robust to applying a recursive window methodology and some of the findings are qualitatively unaltered from using Consensus Economics forecasts in the regressions.

Details

Monetary Policy in the Context of the Financial Crisis: New Challenges and Lessons
Type: Book
ISBN: 978-1-78441-779-6

Keywords

Abstract

Details

Central Bank Policy: Theory and Practice
Type: Book
ISBN: 978-1-78973-751-6

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