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The Global Financial Crisis and the Language of Central Banking: Central Bank Guidance in Good Times and in Bad

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  • Pierre L. Siklos
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    Abstract

    Words are critical in how the public perceives the work of central banks and the quality of monetary policy. Press releases that accompany policy rate decisions and, where available, the minutes of central bank committee meetings, are focal points for the media in public discussions about the conduct of monetary policy. Using data from five countries, I examine whether the language used by central banks has changed since the global financial crisis (GFC) began. Briefly, I find that concerns about financial stability peaked just as the global financial crisis reached its zenith. However, concerns over uncertainty about the current and anticipated state of the economy have also risen over time. More generally, central bank speak became more aggressive throughout the crisis years. More conventional expressions about the current stance of monetary policy took a back seat to other concerns in central bank policy statements and minutes.

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    File URL: https://cama.crawford.anu.edu.au/sites/default/files/publication/cama_crawford_anu_edu_au/2013-08/58_2013_siklos_0.pdf
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    Bibliographic Info

    Paper provided by Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University in its series CAMA Working Papers with number 2013-58.

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    Length: 41 pages
    Date of creation: Sep 2013
    Date of revision:
    Handle: RePEc:een:camaaa:2013-58

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    Keywords: central bank communication; financial stability; language analysis;

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    1. Helge Berger & Michael Ehrmann & Marcel Fratzscher, 2011. "Monetary Policy in the Media," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 43(4), pages 689-709, 06.
    2. Benjamin Born & Michael Ehrmann & Marcel Fratzscher, 2011. "Macroprudential policy and central bank communication," BIS Papers chapters, in: Bank for International Settlements (ed.), Macroprudential regulation and policy, volume 60, pages 107-110 Bank for International Settlements.
    3. Spencer Dale & Athanasios Orphanides & Pär Österholm, 2011. "Imperfect Central Bank Communication: Information versus Distraction," International Journal of Central Banking, International Journal of Central Banking, International Journal of Central Banking, vol. 7(2), pages 3-39, June.
    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 910-45, December.
    5. Born, Benjamin & Ehrmann, Michael & Fratzscher, Marcel, 2011. "Central bank communication on financial stability," Working Paper Series, European Central Bank 1332, European Central Bank.
    6. Dominguez, Kathryn M.E. & Hashimoto, Yuko & Ito, Takatoshi, 2012. "International reserves and the global financial crisis," Journal of International Economics, Elsevier, vol. 88(2), pages 388-406.
    7. Ehrmann, Michael & Fratzscher, Marcel, 2007. "Explaining monetary policy in press conferences," Working Paper Series, European Central Bank 0767, European Central Bank.
    8. Tim Loughran & Bill Mcdonald, 2011. "When Is a Liability Not a Liability? Textual Analysis, Dictionaries, and 10‐Ks," Journal of Finance, American Finance Association, American Finance Association, vol. 66(1), pages 35-65, 02.
    9. David O. Lucca & Francesco Trebbi, 2009. "Measuring Central Bank Communication: An Automated Approach with Application to FOMC Statements," NBER Working Papers 15367, National Bureau of Economic Research, Inc.
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