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How effective is central bank communication in emerging economies? An empirical analysis of the chinese money markets responses to the people’s bank of China’s policy communications

Author

Listed:
  • Shiwei Su

    (Loughborough University)

  • Ahmad Hassan Ahmad

    (Loughborough University)

  • Justine Wood

    (Loughborough University)

Abstract

Central banks, in both developed and developing economies, are responding to the increased demand for transparency in monetary policy formulation and implementation. It is argued that central bank communication enhances market efficiency and calms down market volatility. This paper investigates to what extent that the People Bank of China’s (PBC) communication influences the Chinese money market. Three communication indexes were constructed and used in the empirical analysis. The findings indicate that the PBC’s communication has a significant effect on the country’s money market. Secondly, informal communication appears to be more effective than formal communication. Overall, the results suggest that policy makers and market observers could pay much more attention to the informal communications, such as speeches of the bank’s officials, than formal ones, such as the bank’s report and minutes.

Suggested Citation

  • Shiwei Su & Ahmad Hassan Ahmad & Justine Wood, 2020. "How effective is central bank communication in emerging economies? An empirical analysis of the chinese money markets responses to the people’s bank of China’s policy communications," Review of Quantitative Finance and Accounting, Springer, vol. 54(4), pages 1195-1219, May.
    • Handle: RePEc:kap:rqfnac:v:54:y:2020:i:4:d:10.1007_s11156-019-00822-7
    DOI: 10.1007/s11156-019-00822-7
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    Cited by:

    1. Trabelsi, Emna & Hichri, Walid, 2021. "Central Bank Transparency with (semi-)public Information: Laboratory Experiments," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 90(C).
    2. 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.

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    More about this item

    Keywords

    Central bank communication; Credibility; The PBC; Chinese money market; Central bank communication strategies;
    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
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination

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