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Impact of the central bank's communication on macro financial outcomes

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  • Tetiana Yukhymenko

    (National Bank of Ukraine)

  • Oleh Sorochan

    (National Bank of Ukraine)

Abstract

The study explores the impact of central bank communications on a range of macro-financial indicators. Specifically, we examine whether information posted on the National Bank of Ukraine (NBU) website influences foreign exchange (FX) markets and the inflation expectations of experts. Our main results suggest that the NBU's statements and press releases on monetary policy issues matter. For instance, we find that exchange rate movements and volatility are negatively correlated with the volumes of publications of the NBU on its official website. However, this effect is noticeably bigger for volatility than for exchange rate changes. The impact of communication on FX developments is the strongest a week after the news release, and it persists further. Furthermore, inflation expectations of financial experts, though indifferent to all NBU updates, turn out to be sensitive to monetary policy announcements. The letter reduces the level of expectations and interest rates.

Suggested Citation

  • Tetiana Yukhymenko & Oleh Sorochan, 2024. "Impact of the central bank's communication on macro financial outcomes," IHEID Working Papers 01-2024, Economics Section, The Graduate Institute of International Studies.
    • Handle: RePEc:gii:giihei:heidwp01-2024
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    References listed on IDEAS

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    4. Weber, Christoph S., 2019. "The effect of central bank transparency on exchange rate volatility," Journal of International Money and Finance, Elsevier, vol. 95(C), pages 165-181.
    5. Tetiana Yukhymenko, 2022. "The Role of the Media in the Inflation Expectation Formation Process," Visnyk of the National Bank of Ukraine, National Bank of Ukraine, issue 253, pages 4-26.
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    Keywords

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    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E71 - Macroeconomics and Monetary Economics - - Macro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on the Macro Economy
    • C55 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Large Data Sets: Modeling and Analysis

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