EconPapers    
Economics at your fingertips  
 

Words and deeds in managing expectations: Empirical evidence from an inflation targeting economy

Paweł Baranowski, Wirginia Doryń, Tomasz Łyziak and Ewa Stanisławska

Economic Modelling, 2021, vol. 95, issue C, 49-67

Abstract: Monetary policy affects private sector expectations through not only its actions, but also its communication. In this paper, we adopt a novel approach to compare the impact of central bank interest rate decisions, macroeconomic projections, and textual content of policy documents on private sector expectations. We demonstrate that the role of central bank communication and decisions differs depending on the variable and the forecast horizon. The reaction of inflation expectations to typical changes in policy communication is stronger than their responses to typical policy decisions, whereas the opposite holds for interest rate expectations. Our findings imply that central banks have a range of measures at their disposal to affect expectations. The ability to use communication in managing expectations is especially important when the scope of reducing interest rates is limited.

Keywords: Monetary policy; Central bank communication; Inflation expectations; Interest rate expectations; Survey data; Text mining (search for similar items in EconPapers)
JEL-codes: E52 E58 E31 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0264999320312645
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:95:y:2021:i:c:p:49-67

DOI: 10.1016/j.econmod.2020.12.003

Access Statistics for this article

Economic Modelling is currently edited by S. Hall and P. Pauly

More articles in Economic Modelling from Elsevier
Bibliographic data for series maintained by Nithya Sathishkumar ().

 
Page updated 2021-04-09
Handle: RePEc:eee:ecmode:v:95:y:2021:i:c:p:49-67