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Central Bank Economic Confidence and the Macroeconomy

Masahiko Shibamoto, Kazuhiro Seki and Takashi Kamihigashi
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Kazuhiro Seki: Faculty of Intelligence and Informatics, Konan University, JAPAN

No DP2022-16, Discussion Paper Series from Research Institute for Economics & Business Administration, Kobe University

Abstract: Challenges for empirical research on the role of central bank communication in the macroeconomy include quantitatively characterizing the content of information dissemination by central banks in a way that is comparable and easily interpretable over time, and evaluating the causal relationship between information dissemination and the macroeconomy. This paper quantifies textual data on central bank offcials' statements as characterized by economic cofidence, and uses econometric methodology to examine the dynamic causal effects of measured central bank economic confidence on the macroeconomy. We provide quantitative evidence that central bank information dissemination has two distinct qualities, its economic outlook and sentiment, which have dfferent effects on the macroeconomy. While authorities can be expected to enhance policy effectiveness by communicating their economic outlook and policy belief to the public, the quantitative impact of changed belief on the macroeconomy is not as large as that of an updated economic outlook.

Keywords: Central bank communication; Economic confidence; Macroeconomy; Sentiment analysis; Vector autoregressive model (search for similar items in EconPapers)
JEL-codes: E52 E58 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2022-03
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