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Central bank communication and expectations: Evidence for inflation‐targeting economies

Author

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  • Magdalena Szyszko
  • Agata Kliber
  • Aleksandra Rutkowska
  • Mariusz Próchniak

Abstract

We seek to investigate the effects of communication by central banks on professional and consumer inflation expectations. Accordingly, we investigate 12 small open economies implementing inflation targeting. The communication tone of the central banks is determined based on their post‐decision releases. We use computational linguistics to quantify this factor. With regard to two subsamples that are identified based on the central bank's experience in inflation targeting, we estimate panel models while controlling for other prospective drivers of expectations. The communication tone of a central bank significantly affects the expectations of professional forecasters from economies with more experience in inflation targeting.

Suggested Citation

  • Magdalena Szyszko & Agata Kliber & Aleksandra Rutkowska & Mariusz Próchniak, 2024. "Central bank communication and expectations: Evidence for inflation‐targeting economies," Review of International Economics, Wiley Blackwell, vol. 32(3), pages 1316-1340, August.
    • Handle: RePEc:bla:reviec:v:32:y:2024:i:3:p:1316-1340
    DOI: 10.1111/roie.12730
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    References listed on IDEAS

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