Informal Central Bank Communication

Vissing-Jørgensen, Annette
Authors registered in the RePEc Author Service: Annette Vissing-Jorgensen

No 15603, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Starting from a set of facts on the timing of stock returns relative to Federal Reserve decision-making, I argue that informal communication – including unattributed communication -- plays a central role in monetary policy communication. This contrasts with the standard communications framework in which communication should be public and on-the-record because it serves to ensure accountability and policy effectiveness. I lay out possible benefits of using unattributed communication as an institution, but these should be weighed against substantial costs: It runs counter to accountability to use unattributed communication, causes frustration among those trying to understand central bank intensions, and enables use of such communication by individual policymakers. Unattributed communication driven by policymaker disagreements is unambiguously welfare reducing, because it reduces policy flexibility and harms the central bank’s credibility and decision-making process. I suggest that central banks resist unattributed communication via expensive newsletters and increase consensus-building efforts to reduce disagreement-driven unattributed communication.

Keywords: Monetary policy; Communication; stock market (search for similar items in EconPapers)
JEL-codes: E5 G12 (search for similar items in EconPapers)
Date: 2020-12
New Economics Papers: this item is included in nep-cdm, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Working Paper: Informal Central Bank Communication (2020)
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