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How effective is central bank communication in emerging economies? An empirical analysis of the chinese money markets responses to the people’s bank of China’s policy communications

Shiwei Su, Ahmad Hassan Ahmad and Justine Wood ()
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Shiwei Su: Loughborough University

Review of Quantitative Finance and Accounting, 2020, vol. 54, issue 4, No 2, 1195-1219

Abstract: Abstract Central banks, in both developed and developing economies, are responding to the increased demand for transparency in monetary policy formulation and implementation. It is argued that central bank communication enhances market efficiency and calms down market volatility. This paper investigates to what extent that the People Bank of China’s (PBC) communication influences the Chinese money market. Three communication indexes were constructed and used in the empirical analysis. The findings indicate that the PBC’s communication has a significant effect on the country’s money market. Secondly, informal communication appears to be more effective than formal communication. Overall, the results suggest that policy makers and market observers could pay much more attention to the informal communications, such as speeches of the bank’s officials, than formal ones, such as the bank’s report and minutes.

Keywords: Central bank communication; Credibility; The PBC; Chinese money market; Central bank communication strategies (search for similar items in EconPapers)
JEL-codes: E52 E58 E61 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1007/s11156-019-00822-7

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