Risk and uncertainty in central bank signals

Sheila Christine Dow, Matthias Klaes and Alberto Montagnoli ()

No 023/2008, SCEME Working Papers: Advances in Economic Methodology from SCEME

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.

Keywords: MPC; signal uncertainty; central bank uncertainty; word frequencies; uncertainty index; seasonality (search for similar items in EconPapers)
JEL-codes: E52 E58 E12 D81 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-mac, nep-mon and nep-pke
Date: 2008-05

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Persistent link: http://EconPapers.repec.org/RePEc:sti:wpaper:023/2008

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