Central Bank Communication in Ghana: Insights from a Text Mining Analysis

Abstract

Effective central bank communication is useful for anchoring market expectations and enhancing macroeconomic stability. In this paper, the communication strategy of the Bank of Ghana (BOG) is analysed using BOG’s monetary policy committee press releases for the period 2018-2019. Specifically, we apply text mining techniques to investigate the readability, sentiments and hidden topics of the policy documents. Our results provide evidence of increased central bank communication during the sample period, implying improved monetary policy transparency. Also, the computed Coleman and Liau (1975) readability index shows that the word and sentence structures of the press releases have become less complex, indicating increased readability. Furthermore, we find an average monetary policy net sentiment score of 3.9 per cent. This means that the monetary policy committee expressed positive sentiments regarding policy and macroeconomic outlooks during the period. Finally, the estimated topic model reveals that the topic proportion for “monetary policy and inflation” was prominent in the year 2018 while concerns regarding exchange rate were strong in 2019. The paper recommends that in order to enhance monetary policy communication, the Bank of Ghana should continue to improve on the readability of the monetary policy press releases.