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Risk and uncertainty in central bank signals

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Author Info
Sheila Dow (SCEME, University of Stirling)
Matthias Klaes (Keele University)
Alberto Montagnoli (Department of Economics, University of Stirling)

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Abstract

This paper considers the signalling aspect of monetary policy. We introduce a heuristic framework for the study of signal uncertainty, and use this to analyses the signal uncertainty implicit in the communications of the Bank of England’s Monetary Policy Committee (MPC). Our findings suggest that frequencies of key terms expressing signal uncertainty in MPC minutes may either reflect the degree of confidence implicit in MPC deliberations, or offer evidence for the presence of an irreducible kind of signal uncertainty that shows up as white noise, casting doubt on the soundness of the various qualitative uncertainty indices found in the literature.

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File URL: http://www.sceme.org.uk/wps/SCEME023_DowKlaesMontagnoli_2008.pdf
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Publisher Info
Paper provided by SCEME in its series SCEME Working Papers: Advances in Economic Methodology with number 023/2008.

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Length: 44 pages
Date of creation: May 2008
Date of revision:
Handle: RePEc:sti:wpaper:023/2008

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Web page: http://www.sceme.org.uk/
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Related research
Keywords: MPC; signal uncertainty; central bank uncertainty; word frequencies; uncertainty index; seasonality;

Find related papers by 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
E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian
D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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This page was last updated on 2009-10-29.

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