Monetary communication rules

Laura Gáti and Amy Handlan

No 2759, Working Paper Series from European Central Bank

Abstract: Does the Federal Reserve follow a communication rule? We propose a simple framework to estimate communication rules, which we conceptualize as a systematic mapping between the Fed’s expectations of macroeconomic variables and the words they use to talk about the economy. Using text analysis and regularized regressions, we find strong evidence for systematic communication rules that vary over time, with changes in the rule often being associated with changes in the economic environment. We also find that shifts in communication rules increase disagreement among professional forecasters and correlate with monetary policy surprise measures. Our method is general and can be applied to investigate systematic communication in a wide variety of settings. JEL Classification: E52, E58, C49

Keywords: communication; expectations; monetary policy; NLP; text analysis (search for similar items in EconPapers)
Date: 2022-12
New Economics Papers: this item is included in nep-cba and nep-mon
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Citations: View citations in EconPapers (3)

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Related works:
Working Paper: Monetary Communication Rules (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20222759

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