Economics at your fingertips  

Central Bank Communications and Professional Forecasts: Evidence From India

Ashima Goyal and Prashant Parab

Journal of Emerging Market Finance, 2021, vol. 20, issue 3, 308-336

Abstract: We analyze the influence of qualitative and quantitative communications of the Reserve Bank of India (RBI) on inflation expectations of professional forecasters and draw out implications for policy. Estimating Carroll-type epidemiological models of expectation formation under information rigidities, we get a large speed of adjustment of professional forecasters’ expectations. Analysis of the determinants of inflation forecasts, inflation surprises, and forecaster disagreement reveals significant influence of quantitative RBI communications in the form of inflation projections. This effect is prominent for shorter-horizon forecasts and after adoption of flexible inflation targeting. Macroeconomic fundamentals like lagged inflation and repo rate also significantly influence inflation forecasts. Choice of words in the RBI monetary policy statements has more impact after October 2016, when the monetary policy committee became the decision-making body. JEL Classification: E31, E52, E58

Keywords: Inflation expectations; survey of professional forecasters; central bank communications; text analysis (search for similar items in EconPapers)
Date: 2021
References: Add references at CitEc
Citations: Track citations by RSS feed

Downloads: (external link) (text/html)

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:

DOI: 10.1177/09726527211044056

Access Statistics for this article

More articles in Journal of Emerging Market Finance from Institute for Financial Management and Research
Bibliographic data for series maintained by SAGE Publications ().

Page updated 2023-01-09
Handle: RePEc:sae:emffin:v:20:y:2021:i:3:p:308-336