Words Matter: Central Bank Communication and Household Expectations in a Global Panel

Martin Feldkircher and Christos A. Makridis

CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University

Abstract: This paper studies how the linguistic features of central bank communication affect household economic sentiment. Linking central bank speeches from 29 countries to individual-level data from the Gallup World Poll (2006-2023), we examine whether speech complexity--captured through sentiment, tone, length, and readability--is associated with public perceptions of the economy and labor market. We find that longer and more syntactically complex speeches are consistently linked to lower economic confidence and less favorable views of the job climate. Positive sentiment in modal (i.e., policy-relevant) sentences is associated with more optimistic household outlooks. These effects are stronger among younger and college-educated respondents, suggesting differential processing of complex information. These findings underscore the importance of clarity and tone in central bank messaging and support the view that communication is a key behavioral channel of monetary policy transmission.

Keywords: central bank communication; household expectations; sentiment analysis; monetary policy; public trust; global survey data (search for similar items in EconPapers)
JEL-codes: C23 D84 E52 E58 H63 (search for similar items in EconPapers)
Pages: 50 pages
Date: 2025-07
New Economics Papers: this item is included in nep-big, nep-cba and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:een:camaaa:2025-43

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