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Emerging Market Central Banking and Communication: The Great Catchup

Author

Listed:
  • Piroska Nagy Mohacsi

    (London School of Economics and Political Science)

  • Tatiana Evdokimova

    (Joint Vienna Institute)

  • Olga Ponomarenko

    (Caplight)

  • Elina Ribakova

    (Peterson Institute for International Economics, Bruegel, Kyiv School of Economics)

Abstract

Emerging market (EM) central banks have made remarkable progress in improving their policy frameworks and communication over the past two decades. Their transparency has improved dramatically; the readability of their statements has been better overall than in advanced economies; their focus on inflation has been sharper; several have proven to be better inflation-forecasters; and they have been more sparing in their use of "forward guidance", which reduces data-dependence. All this has served them well in the post-Covid period of high inflation. EM central banks have recently outperformed central banks from the advanced economies in two critical respects: addressing and appropriately communicating post-Covid inflationary pressures in a timely manner, and avoiding banking sector stress during the monetary policy tightening cycle. EM central banks also started easing monetary policy from early/mid-2023, ahead of the Federal Reserve and ECB, although reducing inflation sustainably will be the ultimate test of their framework. This study demonstrates these points through the prism of central bank communication, using novel artificial intelligence (AI) methods. We conclude with policy lessons for both EM and advanced country central banks.

Suggested Citation

  • Piroska Nagy Mohacsi & Tatiana Evdokimova & Olga Ponomarenko & Elina Ribakova, 2024. "Emerging Market Central Banking and Communication: The Great Catchup," Financial and Economic Review, Magyar Nemzeti Bank (Central Bank of Hungary), vol. 23(1), pages 29-49.
    • Handle: RePEc:mnb:finrev:v:23:y:2024:i:1:p:29-49
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    References listed on IDEAS

    as
    1. Gianluca Benigno & Jon Hartley & Alicia García-Herrero & Alessandro Rebucci & Elina Ribakova, 2020. "Credible Emerging Market Central Banks could embrace Quantitative Easing to fight COVID-19," HKUST IEMS Working Paper Series 2020-75, HKUST Institute for Emerging Market Studies, revised Jun 2020.
    2. Bohl, Martin T. & Kanelis, Dimitrios & Siklos, Pierre L., 2023. "Central bank mandates: How differences can influence the content and tone of central bank communication," Journal of International Money and Finance, Elsevier, vol. 130(C).
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    central banking; monetary policy; emerging markets; Federal Reserve; ECB; communication; forward guidance; AI;
    All these keywords.

    JEL classification:

    • B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
    • C55 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Large Data Sets: Modeling and Analysis
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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