 Does People's Bank of China communication matter? Evidence from stock market reactionEmerging Markets Review, 2019, vol. 40, issue C, - Abstract: This paper tests whether the communication of the People's Bank of China affects market expectations and matters as a monetary policy tool. For that purpose, we first rely on a computational linguistic tool to measure the tone of PBC speeches and second, we use a high frequency methodology to estimate the effect of tone on stock price. Our results show that positive changes of the tone affect positively stock price in the Shanghai and the Shenzhen stocks markets. Additional extensions show that PBC communication still has a positive and significant impact on stock price even when controlling for all the monetary policy instruments implemented by the central bank, but that this impact is not persistent over time. One potential channel through which PBC tone affects stock prices is the risk-based channel of monetary policy. Keywords: Central Bank Communication; People's Bank of China; Tone; Financial markets (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ememar:v:40:y:2019:i:c:11 DOI: 10.1016/j.ememar.2019.05.002 Access Statistics for this article Emerging Markets Review is currently edited by Jonathan A. Batten More articles in Emerging Markets Review from Elsevier |
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