Signaling and financial market impact of chile’s central bank communication: a content analysis approach

Mario González and Raul Cruz Tadle

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: The Central Bank of Chile determines Chile’s monetary policy rate and circulates press releases that explain policy decisions after each of its policy meetings. The information contained in these press releases includes current policies, economic outlook, and signals about likely future policies. In this paper, we examine this type of policy communication by using semi-automated content analysis to study the information contained in the releases. Based on this information, we create a quantitative measure that we call the sentiment score index, which we then use to evaluate the effectiveness of the central bank’s communication strategy. In this examination, we analyze whether the central bank’s communication conveys information regarding the future path of the policy rate. We also study the impact of the monetary policy statement on financial markets. We find that the central bank’s communication provides information that helps anticipate the future stance of monetary policy and that causes significant short-term impacts on equity markets.

Keywords: central bank; financial market; monetary policy; communication (search for similar items in EconPapers)
JEL-codes: E44 E52 E58 (search for similar items in EconPapers)
Pages: 52 pages
Date: 2020-04-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published in Economía, 1, April, 2020, 20(2), pp. 127 - 178. ISSN: 1529-7470

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