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Monetary Communication Rules

Author

Listed:
  • Gáti, Laura
  • Handlan, Amy

Abstract

Does the Federal Reserve follow a communication rule? We propose a simple framework to estimate communication rules, which we conceptualize as a systematic mapping between the Fed's expectations of macroeconomic variables and the words they use to talk about the economy. Using text analysis and regularized regressions, we find strong evidence for systematic communication rules that vary over time, with changes in the rule often being associated with changes in the economic environment. We also find that shifts in communication rules increase disagreement among professional forecasters and correlate with monetary policy surprise measures. Our method is general and can be applied to investigate systematic communication in a wide variety of settings.

Suggested Citation

  • Gáti, Laura & Handlan, Amy, 2024. "Monetary Communication Rules," CEPR Discussion Papers 18730, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:18730
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    More about this item

    JEL classification:

    • 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
    • C49 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Other

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