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Qualitative and quantitative central bank communication and inflation expectations

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  • Hubert Paul

    (OFCE – Sciences Po, 69 quai d’Orsay, 75007 Paris, France, Phone: +33 (0)1 44 18 54 27, Fax: +33 (0)1 44 18 54 78)

Abstract

We aim to investigate the simultaneous and interacted effects of central bank qualitative and quantitative communication on private inflation expectations, measured with survey and market-based measures. The effects of ECB inflation projections and Governing Council members’ speeches are identified through an instrumental-variables estimation using a principal component analysis to generate relevant instruments. We find that ECB projections have a positive effect on current-year forecasts, and that ECB projections and speeches are substitutes at longer horizons. Moreover, ECB speeches and the ECB rate reinforce the effect of ECB projections when they are consistent, and convey the same signal about inflationary pressures.

Suggested Citation

  • Hubert Paul, 2017. "Qualitative and quantitative central bank communication and inflation expectations," The B.E. Journal of Macroeconomics, De Gruyter, vol. 17(1), pages 1-41, January.
    • Handle: RePEc:bpj:bejmac:v:17:y:2017:i:1:p:41:n:7
    DOI: 10.1515/bejm-2016-0024
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    More about this item

    Keywords

    central bank communication; European central bank; monetary policy; principal component analysis;
    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

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