Central bank communication: A quantitative assessment

Abstract

In this paper, we propose a new set of indicators of Central Bank's communication to estimate speech intensity in five different macroeconomic fields: monetary conditions, financial stability, external competitiveness, labour and social conditions and economic activity. In addition, we also built an index of Central Banks' communication about the state of the economy and related concepts like uncertainty and risk. To do this, we develop an automated text-mining routine using the Bank of International Settlements (BIS) collection of speeches given by Central Bank senior executives. We use this set of indicators to compare goals and strategies across several Central Banks (the Federal Reserve, the European Central Bank, the Bank of England and the Reserve Bank of Australia) from the late 1990s up to 2023. We then assess whether communication intensity is mirrored in Central Banks' policy decisions. Our empirical results suggest that communication is usually a complement for monetary policy and that its intensity rises as monetary policy becomes more persistent. The late 2010s were an exception. With a near-binding ZLB, communications and policy actions diverged to some extent.