Does the clarity of inflation reports affect volatility in financial markets?
Ales Bulir (),
Martin Cihak () and
DNB Working Papers from Netherlands Central Bank, Research Department
We study whether clarity of central bank inflation reports affects return volatility in financial markets. We measure clarity of reports by the Czech National Bank, the European Central Bank, the Bank of England, and Sveriges Riksbank using the Flesch-Kincaid grade level, a standard readability measure. We find some evidence, mainly for the euro area, of a negative relationship between clarity and market volatility prior to and during the early stage of the global financial crisis. As the crisis unfolded, there is no longer robust evidence of a negative connection. We conclude that reducing noise using clear reports is possible but not without challenges, especially in times of crisis.
Keywords: central bank communication; clarity; financial markets; inflation reports; volatility (search for similar items in EconPapers)
JEL-codes: E44 E52 E58 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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Working Paper: Does the Clarity of Inflation Reports Affect Volatility in Financial Markets? (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:dnb:dnbwpp:439
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