Words of the RBNZ: Textual analysis of Monetary Policy Statements

Clear communication helps New Zealanders understand monetary policy and its relationship to them. Communication explains to the public the purpose and rationale behind monetary policy decisions and, when done right, may enhance monetary policy transmission via different channels (RBNZ, 2020; Blinder et al. 2008; Blot and Hubert, 2018). With this motivation, we apply textual analysis to flagship publications of the Reserve Bank—with the aim of assessing Reserve Bank communications and supporting its mandates of maintaining price stability over the medium term and supporting maximum sustainable employment. Key findings: - Textual analysis shows that keywords mentioned in the Monetary Policy Statements (MPS) align with the objectives in the Remit. - The tone of MPS has been neutral and objective, even as the sentiment in the MPS moves in tandem with household and business confidence surveys. - Similar to monetary policy documents published by central banks overseas, the MPS are complex and may not be accessible to the general public. However, readability, which measures the complexity of a text based on sentence length and the number of syllables in words, has remained stable over 1997Q1-2021Q4 and has marginally improved recently. - The Monetary Policy Snapshots, introduced in 2018, are easier to read than the main part of the MPS – they are accessible to a high school graduate rather than a university graduate.