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Analysing monetary policy statements of the Reserve Bank of India

Aakriti Mathur () and Rajeswari Sengupta ()

No 08-2019, IHEID Working Papers from Economics Section, The Graduate Institute of International Studies

Abstract: In this paper we quantitatively analyse monetary policy statements of the Reserve Bank of India (RBI) between 1998 – 2018, across five governor regimes. Using natural language processing tools, we show that there has been a persistent semantic shift in RBI’s monetary policy communication since the adoption of inflation targeting. Next, we construct measures of linguistic and structural complexity that capture governor-specific trends in communication. RBI’s communication is linguistically complex on average, but the length of monetary policy statements has gone down and readability has improved significantly in recent years. Finally, we show that lengthier, less readable statements are linked to both higher trading volumes and higher returns volatility in equity markets, though the effects are not persistent.

Keywords: Monetary policy; central bank communication; linguistic complexity; financial markets; textual analysis; natural language processing (search for similar items in EconPapers)
JEL-codes: E52 E58 G12 G14 (search for similar items in EconPapers)
Pages: 46 pages
Date: 2019-05-22
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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