Monetary Communication Rules

Gáti, Laura and Amy Handlan
Authors registered in the RePEc Author Service: Laura Gáti

No 18730, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Does the Federal Reserve follow a communication rule? We propose a simple framework to estimate communication rules, which we conceptualize as a systematic mapping between the Fed's expectations of macroeconomic variables and the words they use to talk about the economy. Using text analysis and regularized regressions, we find strong evidence for systematic communication rules that vary over time, with changes in the rule often being associated with changes in the economic environment. We also find that shifts in communication rules increase disagreement among professional forecasters and correlate with monetary policy surprise measures. Our method is general and can be applied to investigate systematic communication in a wide variety of settings.

JEL-codes: C49 E52 E58 (search for similar items in EconPapers)
Date: 2024-01
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Working Paper: Monetary communication rules (2022)
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