Monetary policy communication and inflation expectations: New evidence about tone and readability

We contribute new empirical evidence on monetary policy communication and inflation expectations by firms. First, we construct a new indicator of the perceived tone of monetary policy communication that complements traditional indicators of the effective tone. Both have the expected negative sign an...

Full description

Saved in:
Bibliographic Details
Published in:Latin American journal of central banking 2023-09, Vol.4 (3), p.100088, Article 100088
Main Authors: Carotta, Gianni, Mello, Miguel, Ponce, Jorge
Format: Article
Language:English
Subjects:
C23
E52
E58
Inflation expectations
Monetary policy communication
Readability
Tone
Citations: Items that this one cites
Items that cite this one
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:We contribute new empirical evidence on monetary policy communication and inflation expectations by firms. First, we construct a new indicator of the perceived tone of monetary policy communication that complements traditional indicators of the effective tone. Both have the expected negative sign and are statistically significant in panel data regressions with firms’ inflation expectations as the dependent variable, suggesting that communication has an important effect over inflation expectations. We also compute readability and perspicuity indicators of the communications. Better readability of monetary policy communication reinforces the effect of the tone. Impact is larger when combined with the indicator of effective tone, suggesting that readability is an important component in monetary policy communication.
ISSN:2666-1438
2666-1438
DOI:10.1016/j.latcb.2023.100088