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Markets are a function of language: Notes on a narrative economics

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  • Holmes, Douglas R.

Abstract

Narratives are under-theorised and until recently under-recognised as core variables influencing the speed and direction of changes in expectations and, therefore, as core macroeconomic variables that shape the policy processes of central banks. The author examines below how the thousands of micro-level narratives garnered on a regular basis by the Bank of England's staff of regional agents can inform what Ricardo Reis and Alan Blinder (Understanding the Greenspan standard, 2005) term the "macroeconomic allegories" that influence monetary policy decision-making. The contacts that make up the "network" perform descriptive, explanatory, and interpretive labor in situ putting words both to the ephemera of local expectations across the UK and to the rapidly changing competitive pressures unfolding in global markets. Internal studies have demonstrated that the micro-level narratives collected and scored by the agents provide the most reliable information on the future course of the British economy of any of the projections or forecasts available to the Bank.

Suggested Citation

  • Holmes, Douglas R., 2019. "Markets are a function of language: Notes on a narrative economics," Economics Discussion Papers 2019-18, Kiel Institute for the World Economy (IfW Kiel).
    • Handle: RePEc:zbw:ifwedp:201918
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    References listed on IDEAS

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    1. Fabian Muniesa & Michel Callon, 2007. "Economic experiments and the construction of markets," Post-Print halshs-00177935, HAL.
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    6. McCloskey,Deirdre N., 1994. "Knowledge and Persuasion in Economics," Cambridge Books, Cambridge University Press, number 9780521436038, September.
    7. Alan S. Blinder & Ricardo Reis, 2005. "Understanding the Greenspan standard," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, issue Aug, pages 11-96.
    8. Bronk,Richard, 2009. "The Romantic Economist," Cambridge Books, Cambridge University Press, number 9780521513845, September.
    9. Morgan,Mary S., 2012. "The World in the Model," Cambridge Books, Cambridge University Press, number 9781107002975, September.
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    12. Brunner, Karl & Meltzer, Allan H, 1971. "The Uses of Money: Money in the Theory of an Exchange Economy," American Economic Review, American Economic Association, vol. 61(5), pages 784-805, December.
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    Cited by:

    1. Francesco Carbonero & Jeremy Davies & Ekkehard Ernst & Sayantan Ghosal & Leaza McSorley, 2021. "Anxiety, Expectations Stabilization and Intertemporal Markets: Theory, Evidence and Policy," Working Papers 2021_12, Business School - Economics, University of Glasgow.

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    More about this item

    Keywords

    central banks and their policies; role and effects of psychological; emotional; social; and cognitive factors on the macro economy;
    All these keywords.

    JEL classification:

    • E47 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Forecasting and Simulation: Models and Applications
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E71 - Macroeconomics and Monetary Economics - - Macro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on the Macro Economy

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