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Risk and uncertainty in central bank signals

Author

Listed:
  • Sheila Dow

    (SCEME, University of Stirling)

  • Matthias Klaes

    (Keele University)

  • Alberto Montagnoli

    (Department of Economics, University of Stirling)

Abstract

This paper considers the signalling aspect of monetary policy. We introduce a heuristic framework for the study of signal uncertainty, and use this to analyses the signal uncertainty implicit in the communications of the Bank of England’s Monetary Policy Committee (MPC). Our findings suggest that frequencies of key terms expressing signal uncertainty in MPC minutes may either reflect the degree of confidence implicit in MPC deliberations, or offer evidence for the presence of an irreducible kind of signal uncertainty that shows up as white noise, casting doubt on the soundness of the various qualitative uncertainty indices found in the literature.

Suggested Citation

  • Sheila Dow & Matthias Klaes & Alberto Montagnoli, 2008. "Risk and uncertainty in central bank signals," SCEME Working Papers: Advances in Economic Methodology 023/2008, SCEME.
    • Handle: RePEc:sti:wpaper:023/2008
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    File URL: http://www.sceme.org.uk/wps/SCEME023_DowKlaesMontagnoli_2008.pdf
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    More about this item

    Keywords

    MPC; signal uncertainty; central bank uncertainty; word frequencies; uncertainty index; seasonality;
    All these keywords.

    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
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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