EconPapers    
Economics at your fingertips  
 

Central Bank Communication: One Size Does Not Fit All

Joan Huang and John Simon
Additional contact information
Joan Huang: Reserve Bank of Australia

RBA Research Discussion Papers from Reserve Bank of Australia

Abstract: High-quality central bank communication can improve the effectiveness of monetary policy and is an essential element in providing greater central bank transparency. There is, however, no agreement on what high-quality communication looks like. To shed light on this, we investigate 3 important aspects of central bank communication. We focus on how different audiences perceive the readability and degree of reasoning within various economic publications; providing the reasons for decisions is a critical element of transparency. We find that there is little correlation between perceived readability and reasoning in the economic communications we analyse, which highlights that commonly used measures of readability can miss important aspects of communication. We also find that perceptions of communication quality can vary significantly between audiences; one size does not fit all. To dig deeper we use machine learning techniques and develop a model that predicts the way different audiences rate the readability of and reasoning within texts. The model highlights that simpler writing is not necessarily more readable nor more revealing of the author's reasoning. The results also show how readability and reasoning vary within and across documents; good communication requires a variety of styles within a document, each serving a different purpose, and different audiences need different styles. Greater central bank transparency and more effective communication require an emphasis not just on greater readability of a single document, but also on setting out the reasoning behind conclusions in a variety of documents that each meet the needs of different audiences.

Keywords: central bank communications; machine learning; natural language processing; readability; central bank transparency (search for similar items in EconPapers)
JEL-codes: C61 C83 D83 E58 Z13 (search for similar items in EconPapers)
Date: 2021-05
New Economics Papers: this item is included in nep-big, nep-cba, nep-cmp, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
https://www.rba.gov.au/publications/rdp/2021/pdf/rdp2021-05.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:rba:rbardp:rdp2021-05

DOI: 10.47688/rdp2021-05

Access Statistics for this paper

More papers in RBA Research Discussion Papers from Reserve Bank of Australia Contact information at EDIRC.
Bibliographic data for series maintained by Paula Drew ().

 
Page updated 2021-10-16
Handle: RePEc:rba:rbardp:rdp2021-05