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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. Blinder, Alan S. & Ehrmann, Michael & de Haan, Jakob & Fratzscher, Marcel & Jansen, David-Jan, 2008. "Central Bank communication and monetary policy: a survey of theory and evidence," Working Paper Series 0898, European Central Bank.
    2. Born, Benjamin & Ehrmann, Michael & Fratzscher, Marcel, 2010. "Macroprudential policy and central bank communication," CEPR Discussion Papers 8094, C.E.P.R. Discussion Papers.
    3. Tim Loughran & Bill Mcdonald, 2011. "When Is a Liability Not a Liability? Textual Analysis, Dictionaries, and 10‐Ks," Journal of Finance, American Finance Association, vol. 66(1), pages 35-65, 02.
    4. Michael Ehrmann & Marcel Fratzscher, 2009. "Explaining Monetary Policy in Press Conferences," International Journal of Central Banking, International Journal of Central Banking, vol. 5(2), pages 42-84, June.
    5. 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.
    6. 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.
    7. Spencer Dale & Athanasios Orphanides & Pär Österholm, 2011. "Imperfect Central Bank Communication: Information versus Distraction," International Journal of Central Banking, International Journal of Central Banking, vol. 7(2), pages 3-39, June.
    8. Berger, Helge & Ehrmann, Michael & Fratzscher, Marcel, 2006. "Monetary policy in the media," Working Paper Series 0679, European Central Bank.
    9. Born, Benjamin & Ehrmann, Michael & Fratzscher, Marcel, 2011. "Central bank communication on financial stability," Working Paper Series 1332, European Central Bank.
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