IDEAS home Printed from https://ideas.repec.org/a/bkr/journl/v80y2021i3p3-33.html
   My bibliography  Save this article

Assessment of Clarity of Bank of Russia Monetary Policy Communication by Neural Network Approach

Author

Listed:
  • Alina Evstigneeva

    (Bank of Russia)

  • Mark Sidorovskiy

    (Bank of Russia)

Abstract

Inflation targeting requires clear and transparent central bank’s communication. Analysts and market participants understand it as a broad list of information disclosed by the central bank. The general public understands it rather as the ability of a central bank to speak and explain its decisions in a plain language. In recent decades, monetary authorities in many countries have made significant progress in this direction. However, there has been no research on the quality of communication for the Bank of Russia. This paper aims to create a tool for automated evaluation of the readability of the Bank of Russia’s monetary policy communication, taking into account the available experience of linguistic and textual analysis, including machine learning methods, as well as to provide recommendations for its improvement. This can contribute to improving the effectiveness of the Bank of Russia communication on monetary policy, which is vital for its credibility, anchoring inflation expectations, and predictability of the regulator’s decisions.

Suggested Citation

  • Alina Evstigneeva & Mark Sidorovskiy, 2021. "Assessment of Clarity of Bank of Russia Monetary Policy Communication by Neural Network Approach," Russian Journal of Money and Finance, Bank of Russia, vol. 80(3), pages 3-33, September.
    • Handle: RePEc:bkr:journl:v:80:y:2021:i:3:p:3-33
    DOI: 10.31477/rjmf.202103.03
    as

    Download full text from publisher

    File URL: https://rjmf.econs.online/upload/iblock/2e0/Clarity_of_Monetary_Policy_Communication.pdf
    Download Restriction: no
    File URL: https://libkey.io/10.31477/rjmf.202103.03?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Svensson, Lars E. O., 1997. "Inflation forecast targeting: Implementing and monitoring inflation targets," European Economic Review, Elsevier, vol. 41(6), pages 1111-1146, June.
    2. N. Nergiz Dincer & Barry Eichengreen, 2014. "Central Bank Transparency and Independence: Updates and New Measures," International Journal of Central Banking, International Journal of Central Banking, vol. 10(1), pages 189-259, March.
    3. Aleš Bulíř & Martin Čihák & David-Jan Jansen, 2013. "What Drives Clarity of Central Bank Communication About Inflation?," Open Economies Review, Springer, vol. 24(1), pages 125-145, February.
    4. Alan S. Blinder & Michael Ehrmann & Marcel Fratzscher & Jakob De Haan & David-Jan Jansen, 2008. "Central Bank Communication and Monetary Policy: A Survey of Theory and Evidence," Journal of Economic Literature, American Economic Association, vol. 46(4), pages 910-945, December.
    5. Eijffinger, Sylvester C.W. & Geraats, Petra M., 2006. "How transparent are central banks?," European Journal of Political Economy, Elsevier, vol. 22(1), pages 1-21, March.
    6. Tatiana Evdokimova & Grigory Zhirnov & Inge Klaver, 2019. "The Impact of Inflation Anchor Strength and Monetary Policy Transparency on Inflation During the Period of Emerging Market Volatility in Summer 2018," Russian Journal of Money and Finance, Bank of Russia, vol. 78(3), pages 71-88, September.
    7. Jansen, David-Jan, 2011. "Mumbling with great incoherence: Was it really so difficult to understand Alan Greenspan?," Economics Letters, Elsevier, vol. 113(1), pages 70-72, October.
    8. Giuseppe Bruno, 2017. "Central Bank Communications: information extraction and semantic analysis," IFC Bulletins chapters, in: Bank for International Settlements (ed.), Big Data, volume 44, Bank for International Settlements.
    9. repec:hal:spmain:info:hdl:2441/33o86cn6qp83dot08iir97915s is not listed on IDEAS
    10. Yann Algan & Pierre Cahuc, 2014. "Trust, Well-Being and Growth: New Evidence and Policy Implications," SciencePo Working papers Main hal-01169659, HAL.
    11. Kevyn Collins‐Thompson & Jamie Callan, 2005. "Predicting reading difficulty with statistical language models," Journal of the American Society for Information Science and Technology, Association for Information Science & Technology, vol. 56(13), pages 1448-1462, November.
    12. Alan S. Blinder & Michael Ehrmann & Marcel Fratzscher & Jakob De Haan & David-Jan Jansen, 2008. "Central Bank Communication and Monetary Policy: A Survey of Theory and Evidence," Journal of Economic Literature, American Economic Association, vol. 46(4), pages 910-945, December.
    13. Algan, Yann & Cahuc, Pierre, 2014. "Trust, Growth, and Well-Being: New Evidence and Policy Implications," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 2, chapter 2, pages 49-120, Elsevier.
    14. repec:pri:cepsud:161blinder is not listed on IDEAS
    15. Scott Deerwester & Susan T. Dumais & George W. Furnas & Thomas K. Landauer & Richard Harshman, 1990. "Indexing by latent semantic analysis," Journal of the American Society for Information Science, Association for Information Science & Technology, vol. 41(6), pages 391-407, September.
    16. Müller, Lena Sophia & Glas, Alexander, 2021. "Talking in a language that everyone can understand? Transparency of speeches by the ECB Executive Board," VfS Annual Conference 2021 (Virtual Conference): Climate Economics 242364, Verein für Socialpolitik / German Economic Association.
    17. Mr. Douglas Laxton & Charles Freedman, 2009. "Inflation Targeting Pillars - Transparency and Accountability," IMF Working Papers 2009/262, International Monetary Fund.
    18. Charles Freedman & Mr. Douglas Laxton, 2009. "Why Inflation Targeting?," IMF Working Papers 2009/086, International Monetary Fund.
    19. Rania A. Al-Mashat & Mr. Ales Bulir & N. Nergiz Dinçer & Tibor Hlédik & Mr. Tomás Holub & Asya Kostanyan & Mr. Douglas Laxton & Armen Nurbekyan & Mr. Rafael A Portillo & Hou Wang, 2018. "An Index for Transparency for Inflation-Targeting Central Banks: Application to the Czech National Bank," IMF Working Papers 2018/210, International Monetary Fund.
    20. Babatunde Samson Omotosho, 2020. "Central Bank Communication In Ghana: Insights From A Text Mining Analysis," Noble International Journal of Economics and Financial Research, Noble Academic Publsiher, vol. 5(1), pages 01-13, January.
    21. Alex Isakov & Petr Grishin & Oleg Gorlinsky, 2018. "Fear of Forward Guidance," Russian Journal of Money and Finance, Bank of Russia, vol. 77(4), pages 84-106, December.
    22. Glas, Alexander & Müller, Lena, 2021. "Talking in a language that everyone can understand? Transparency of speeches by the ECB Executive Board," FAU Discussion Papers in Economics 01/2021, Friedrich-Alexander University Erlangen-Nuremberg, Institute for Economics.
    23. Andrew Haldane & Michael McMahon, 2018. "Central Bank Communications and the General Public," AEA Papers and Proceedings, American Economic Association, vol. 108, pages 578-583, May.
    24. Oecd, 2015. "Teaching with technology," Teaching in Focus 12, OECD Publishing.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ferrara, Federico Maria & Angino, Siria, 2022. "Does clarity make central banks more engaging? Lessons from ECB communications," European Journal of Political Economy, Elsevier, vol. 74(C).
    2. Thomas Lustenberger & Enzo Rossi, 2020. "Does Central Bank Transparency and Communication Affect Financial and Macroeconomic Forecasts?," International Journal of Central Banking, International Journal of Central Banking, vol. 16(2), pages 153-201, March.
    3. G. C. Montes & L. V. Oliveira & A. Curi & R. T. F. Nicolay, 2016. "Effects of transparency, monetary policy signalling and clarity of central bank communication on disagreement about inflation expectations," Applied Economics, Taylor & Francis Journals, vol. 48(7), pages 590-607, February.
    4. Müller, Lena Sophia & Glas, Alexander, 2021. "Talking in a language that everyone can understand? Transparency of speeches by the ECB Executive Board," VfS Annual Conference 2021 (Virtual Conference): Climate Economics 242364, Verein für Socialpolitik / German Economic Association.
    5. David-Jan Jansen & Richhild Moessner, 2016. "Communicating dissent on monetary policy: Evidence from central bank minutes," DNB Working Papers 512, Netherlands Central Bank, Research Department.
    6. G. C. Montes & R. T. F. Nicolay, 2017. "Does clarity of central bank communication affect credibility? Evidences considering governor-specific effects," Applied Economics, Taylor & Francis Journals, vol. 49(32), pages 3163-3180, July.
    7. Hwang, In Do & Lustenberger, Thomas & Rossi, Enzo, 2021. "Does communication influence executives’ opinion of central bank policy?☆," Journal of International Money and Finance, Elsevier, vol. 115(C).
    8. Ngomba Bodi, Francis Ghislain & Tadadjeu Wemba, Dessy-Karl & Soulemanou, Soulemanou, 2020. "Transparence des Banques Centrales et efficacité de la politique monétaire : quelles implications pour la Banque des Etats de l’Afrique Centrale ? [Central Bank's Transparency and effectiveness of ," MPRA Paper 116436, University Library of Munich, Germany.
    9. Arnold Segawa, 2021. "Sentimental Outlook for the Monetary Policies of South African Reserve Bank," International Journal of Finance & Banking Studies, Center for the Strategic Studies in Business and Finance, vol. 10(3), pages 37-56, July.
    10. Miguel Acosta, 2015. "FOMC Responses to Calls for Transparency," Finance and Economics Discussion Series 2015-60, Board of Governors of the Federal Reserve System (U.S.).
    11. Glas, Alexander & Müller, Lena, 2021. "Talking in a language that everyone can understand? Transparency of speeches by the ECB Executive Board," FAU Discussion Papers in Economics 01/2021, Friedrich-Alexander University Erlangen-Nuremberg, Institute for Economics.
    12. Mariusz Prochniak & Magdalena Szyszko, 2019. "The similarity of European central banks in terms of transparency and effectiveness," Equilibrium. Quarterly Journal of Economics and Economic Policy, Institute of Economic Research, vol. 14(3), pages 385-404, September.
    13. Ruttachai Seelajaroen & Pornanong Budsaratragoon & Boonlert Jitmaneeroj, 2020. "Do monetary policy transparency and central bank communication reduce interest rate disagreement?," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 39(3), pages 368-393, April.
    14. Akosah, Nana Kwame & Alagidede, Imhotep Paul & Schaling, Eric, 2020. "Testing for asymmetry in monetary policy rule for small-open developing economies: Multiscale Bayesian quantile evidence from Ghana," The Journal of Economic Asymmetries, Elsevier, vol. 22(C).
    15. Jonne Lehtimäki & Marianne Palmu, 2022. "Who Should You Listen to in a Crisis? Differences in Communication of Central Bank Policymakers," Journal of Central Banking Theory and Practice, Central bank of Montenegro, vol. 11(3), pages 33-57.
    16. Donato Masciandaro & Davide Romelli & Gaia Rubera, 2021. "Monetary policy and financial markets: evidence from Twitter traffic," BAFFI CAREFIN Working Papers 21160, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.
    17. Freddy H. CASTRO, 2012. "Senales de política monetaria y movimientos en la estructura a plazo de la tasa de interés en Colombia," Archivos de Economía 9908, Departamento Nacional de Planeación.
    18. Donato Masciandaro & Davide Romelli, 2019. "Behavioral Monetary Policymaking: Economics, Political Economy and Psychology," World Scientific Book Chapters, in: Behavioral Finance The Coming of Age, chapter 9, pages 285-329, World Scientific Publishing Co. Pte. Ltd..
    19. Hayo, Bernd & Neumeier, Florian, 2020. "Public knowledge about and attitudes towards central bank independence in New Zealand," Journal of Banking & Finance, Elsevier, vol. 113(C).
    20. Baranowski, Paweł & Doryń, Wirginia & Łyziak, Tomasz & Stanisławska, Ewa, 2021. "Words and deeds in managing expectations: Empirical evidence from an inflation targeting economy," Economic Modelling, Elsevier, vol. 95(C), pages 49-67.

    More about this item

    Keywords

    monetary policy; communication; text analysis; neural networks; NLP;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bkr:journl:v:80:y:2021:i:3:p:3-33. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Olga Kuvshinova (email available below). General contact details of provider: https://edirc.repec.org/data/cbrgvru.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.