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

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...

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Bibliographic Details
Published in:Journal of economic literature 2008-12, Vol.46 (4), p.910-945
Main Authors: Blinder, Alan S., Ehrmann, Michael, Fratzscher, Marcel, de Haan, Jakob, Jansen, David-Jan
Format: Article
Language:English
Subjects:
Banking industry
Banking policy
Central banks
Communication
Communication economics
Economic expectations
Economic theory
European Central Bank
Federal funding
Federal funds rate
Federal Reserve Bank
Federal Reserve monetary policy
Financial markets
Inflation rates
Inflation targeting
Interest rates
Monetary economics
Monetary policy
Noise
Studies
Transparency
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Summary: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.
ISSN:0022-0515
2328-8175
DOI:10.1257/jel.46.4.910