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Qualitative and quantitative central bank communication and inflation expectations

Author

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  • Paul Hubert

    (OFCE - Observatoire français des conjonctures économiques (Sciences Po) - Sciences Po - Sciences Po)

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

  • Paul Hubert, 2017. "Qualitative and quantitative central bank communication and inflation expectations," Post-Print hal-03409181, HAL.
    • Handle: RePEc:hal:journl:hal-03409181
    DOI: 10.1515/bejm-2016-0024
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    References listed on IDEAS

    as
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    Citations

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    Cited by:

    1. Granziera, Eleonora & Jalasjoki, Pirkka & Paloviita, Maritta, 2021. "The bias and efficiency of the ECB inflation projections: a State dependent analysis," Research Discussion Papers 7/2021, Bank of Finland.
    2. Bennani, Hamza, 2019. "Does People's Bank of China communication matter? Evidence from stock market reaction," Emerging Markets Review, Elsevier, vol. 40(C), pages 1-1.
    3. Paul Hubert & Fabien Labondance, 2016. "Central Bank Sentiment and Policy Expectations," SciencePo Working papers Main hal-03459227, HAL.
    4. repec:hal:spmain:info:hdl:2441/7mota32nad8aopst8f7d5aebpo is not listed on IDEAS
    5. Paloviita, Maritta & Haavio, Markus & Jalasjoki, Pirkka & Kilponen, Juha & Vänni, Ilona, 2020. "Reading between the lines : Using text analysis to estimate the loss function of the ECB," Research Discussion Papers 12/2020, Bank of Finland.
    6. repec:hal:spmain:info:hdl:2441/64veevce0i99oav223j3pkv1hf is not listed on IDEAS
    7. Łyziak, Tomasz & Paloviita, Maritta, 2018. "On the formation of inflation expectations in turbulent times: The case of the euro area," Economic Modelling, Elsevier, vol. 72(C), pages 132-139.
    8. Hubert, Paul & Labondance, Fabien, 2021. "The signaling effects of central bank tone," European Economic Review, Elsevier, vol. 133(C).
    9. repec:hal:spmain:info:hdl:2441/4evh7bju58uep3gd1frcn5nr9 is not listed on IDEAS
    10. Paul Hubert & Fabien Labondance, 2019. "Central bank tone and the dispersion of views within monetary policy committees," Sciences Po publications 2019 – 08, Sciences Po.
    11. repec:zbw:bofitp:2019_009 is not listed on IDEAS
    12. Paloviita, Maritta & Haavio, Markus & Jalasjoki, Pirkka & Kilponen, Juha & Vänni, Ilona, 2020. "Reading between the lines: Using text analysis to estimate the loss function of the ECB," Bank of Finland Research Discussion Papers 12/2020, Bank of Finland.
    13. repec:zbw:bofrdp:2021_007 is not listed on IDEAS
    14. repec:hal:spmain:info:hdl:2441/3mgbd73vkp9f9oje7utooe7vpg is not listed on IDEAS
    15. repec:hal:spmain:info:hdl:2441/7v8fvu0bf08jcoi4epn8cutjm8 is not listed on IDEAS
    16. Antón Sarabia Arturo & Bazdresch Santiago & Lelo-de-Larrea Alejandra, 2023. "The Influence of Central Bank's Projections and Economic Narrative on Professional Forecasters' Expectations: Evidence from Mexico," Working Papers 2023-21, Banco de México.
    17. Łyziak, Tomasz & Paloviita, Maritta, 2017. "Formation of inflation expectations in turbulent times: Can ECB manage inflation expectations of professional forecasters?," Bank of Finland Research Discussion Papers 13/2017, Bank of Finland.
    18. repec:zbw:bofrdp:2017_013 is not listed on IDEAS
    19. Eleonora Granziera & Pirkka Jalasjoki & Maritta Paloviita, 2021. "The Bias and Efficiency of the ECB Inflation Projections: a State Dependent Analysis," Working Paper 2021/1, Norges Bank.
    20. Łyziak, Tomasz & Paloviita, Maritta, 2017. "Formation of inflation expectations in turbulent times : Can ECB manage inflation expectations of professional forecasters?," Research Discussion Papers 13/2017, Bank of Finland.
    21. repec:zbw:bofrdp:2020_012 is not listed on IDEAS
    22. Pooja Kapoor & Sujata Kar, 2024. "Do Central Bank Communications Influence Survey of Professional Forecasters? An Empirical Investigation," Business Perspectives and Research, , vol. 12(1), pages 100-112, January.
    23. Granziera, Eleonora & Jalasjoki, Pirkka & Paloviita, Maritta, 2021. "The bias and efficiency of the ECB inflation projections: A state dependent analysis," Bank of Finland Research Discussion Papers 7/2021, Bank of Finland.

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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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