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Signaling and financial market impact of chile’s central bank communication: a content analysis approach

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  • González, Mario
  • Tadle, Raul Cruz

Abstract

The Central Bank of Chile determines Chile’s monetary policy rate and circulates press releases that explain policy decisions after each of its policy meetings. The information contained in these press releases includes current policies, economic outlook, and signals about likely future policies. In this paper, we examine this type of policy communication by using semi-automated content analysis to study the information contained in the releases. Based on this information, we create a quantitative measure that we call the sentiment score index, which we then use to evaluate the effectiveness of the central bank’s communication strategy. In this examination, we analyze whether the central bank’s communication conveys information regarding the future path of the policy rate. We also study the impact of the monetary policy statement on financial markets. We find that the central bank’s communication provides information that helps anticipate the future stance of monetary policy and that causes significant short-term impacts on equity markets.

Suggested Citation

  • González, Mario & Tadle, Raul Cruz, 2020. "Signaling and financial market impact of chile’s central bank communication: a content analysis approach," LSE Research Online Documents on Economics 123054, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:123054
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    More about this item

    Keywords

    central bank; financial market; monetary policy; communication;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • 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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