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Can central bank communication help to stabilise inflation expectations?

Alexander Jung () and Patrick Kuehl

Scottish Journal of Political Economy, 2021, vol. 68, issue 3, 298-321

Abstract: This paper examines whether central bank communication stabilises euro area inflation expectations through the information and news channel. A novelty of the study is its use of data from Google Analytics on ECB website traffic as proxy for visitors’ attention to its communication. We conduct several econometric tests with daily data to measure the impact of ECB communication on the information demand of the public and ultimately on inflation expectations. Overall, this study shows that website attention, as captured by search volumes of visitors, influences euro area inflation expectations. We find that increased website attention contributes to narrowing the gap between market‐based forecasts and (the mean of) longer‐term professional inflation expectations. Our findings add to the theoretical evidence on the existence of an information and news channel.

Date: 2021
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https://doi.org/10.1111/sjpe.12276

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Scottish Journal of Political Economy is currently edited by Tim Barmby, Andrew Hughes-Hallett and Campbell Leith

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