IDEAS home Printed from https://ideas.repec.org/p/pri/cepsud/164.html
   My bibliography  Save this paper

Talking about Monetary Policy: The Virtues (and Vices?) of Central Bank Communication

Author

Listed:
  • Alan S. Blinder

    (Princeton University)

Abstract

Central banks, which used to be so secretive, are communicating more and more these days about their monetary policy. This development has proceeded hand in glove with a burgeoning new scholarly literature on the subject. The empirical evidence, reviewed selectively here, suggests that communication can move financial markets, enhance the predictability of monetary policy decisions, and perhaps even help central banks achieve their goals. A number of theoretical drawbacks to greater communication are also reviewed here. None seems very important in practice. That said, no consensus has yet emerged regarding what constitutes "optimal" communication strategy?either in quantity or nature.

Suggested Citation

  • Alan S. Blinder, 2008. "Talking about Monetary Policy: The Virtues (and Vices?) of Central Bank Communication," Working Papers 1048, Princeton University, Department of Economics, Center for Economic Policy Studies..
    • Handle: RePEc:pri:cepsud:164
    as

    Download full text from publisher

    File URL: https://gceps.princeton.edu/wp-content/uploads/2017/01/164blinder.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Refet S. Gürkaynak & Andrew T. Levin & Eric T. Swanson, 2006. "Does inflation targeting anchor long-run inflation expectations? evidence from long-term bond yields in the U.S., U.K., and Sweden," Working Paper Series 2006-09, Federal Reserve Bank of San Francisco.
    2. Alan S. Blinder & Michael Ehrmann & Marcel Fratzscher & Jakob De Haan & David-Jan Jansen, 2008. "Central Bank Communication and Monetary Policy: A Survey of Theory and Evidence," Journal of Economic Literature, American Economic Association, vol. 46(4), pages 910-945, December.
    3. Ben S. Bernanke & Michael Woodford, 2004. "The Inflation-Targeting Debate," NBER Books, National Bureau of Economic Research, Inc, number bern04-1.
    4. Frederic S Mishkin, 2004. "Can Central Bank Transparency Go Too Far?," RBA Annual Conference Volume (Discontinued), in: Christopher Kent & Simon Guttmann (ed.),The Future of Inflation Targeting, Reserve Bank of Australia.
    5. Richhild Moessner & William R. Nelson, 2008. "Central Bank Policy Rate Guidance and Financial Market Functioning," International Journal of Central Banking, International Journal of Central Banking, vol. 4(4), pages 193-226, December.
    6. Ellis Connolly & Marion Kohler, 2004. "News and Interest Rate Expectations: A Study of Six Central Banks," RBA Annual Conference Volume (Discontinued), in: Christopher Kent & Simon Guttmann (ed.),The Future of Inflation Targeting, Reserve Bank of Australia.
    7. Goodfriend, Marvin, 1986. "Monetary mystique: Secrecy and central banking," Journal of Monetary Economics, Elsevier, vol. 17(1), pages 63-92, January.
    8. Johnson, David R., 2002. "The effect of inflation targeting on the behavior of expected inflation: evidence from an 11 country panel," Journal of Monetary Economics, Elsevier, vol. 49(8), pages 1521-1538, November.
    9. Castelnuovo, Efrem & Rodriguez-Palenzuela, Diego & Nicoletti Altimari, Sergio, 2003. "Definition of price stability, range and point inflation targets: the anchoring of long-term inflation expectations," Working Paper Series 273, European Central Bank.
    10. Frederic S. Miskin & Klaus Schmidt-Hebbel, 2007. "Does Inflation Targeting Make a Difference?," Central Banking, Analysis, and Economic Policies Book Series, in: Frederic S. Miskin & Klaus Schmidt-Hebbel & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Se (ed.),Monetary Policy under Inflation Targeting, edition 1, volume 11, chapter 9, pages 291-372, Central Bank of Chile.
    11. David-Jan Jansen & Jakob de Haan, 2006. "Look who's talking: ECB communication during the first years of EMU," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 11(3), pages 219-228.
    12. Andersson, Malin & Dillen, Hans & Sellin, Peter, 2006. "Monetary policy signaling and movements in the term structure of interest rates," Journal of Monetary Economics, Elsevier, vol. 53(8), pages 1815-1855, November.
    13. Alan S. Blinder & Michael Ehrmann & Marcel Fratzscher & Jakob De Haan & David-Jan Jansen, 2008. "Central Bank Communication and Monetary Policy: A Survey of Theory and Evidence," Journal of Economic Literature, American Economic Association, vol. 46(4), pages 910-945, December.
    14. Rosa, Carlo & Verga, Giovanni, 2007. "On the consistency and effectiveness of central bank communication: Evidence from the ECB," European Journal of Political Economy, Elsevier, vol. 23(1), pages 146-175, March.
    15. Michael R. Pakko, 2005. "On the Information Content of Asymmetric FOMC Policy Statements: Evidence From a Taylor-Rule Perspective," Economic Inquiry, Western Economic Association International, vol. 43(3), pages 558-569, July.
    16. Marco Vega & Diego Winkelried, 2005. "Inflation Targeting and Inflation Behavior: A Successful Story?," International Journal of Central Banking, International Journal of Central Banking, vol. 1(3), December.
    17. Michael Ehrmann & Marcel Fratzscher, 2007. "Communication by Central Bank Committee Members: Different Strategies, Same Effectiveness?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(2‐3), pages 509-541, March.
    18. Ehrmann, Michael & Fratzscher, Marcel, 2007. "Social value of public information: testing the limits to transparency," Working Paper Series 821, European Central Bank.
    19. Pierre Gosselin & Aileen Lotz & Charles Wyplosz, 2009. "Interest Rate Signals and Central Bank Transparency," NBER Chapters, in: NBER International Seminar on Macroeconomics 2007, pages 9-51, National Bureau of Economic Research, Inc.
    20. Meade, Ellen E & Sheets, D Nathan, 2005. "Regional Influences on FOMC Voting Patterns," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 37(4), pages 661-677, August.
    21. Otmar Issing, 2005. "Communication, transparency, accountability: monetary policy in the twenty-first century," Review, Federal Reserve Bank of St. Louis, vol. 87(Mar), pages 65-83.
    22. Blinder, Alan S., 2007. "Monetary policy by committee: Why and how?," European Journal of Political Economy, Elsevier, vol. 23(1), pages 106-123, March.
    23. repec:pri:cepsud:161blinder is not listed on IDEAS
    24. Stephen Morris & Hyun Song Shin, 2002. "Social Value of Public Information," American Economic Review, American Economic Association, vol. 92(5), pages 1521-1534, December.
    25. Reeves, Rachel & Sawicki, Michael, 2007. "Do financial markets react to Bank of England communication?," European Journal of Political Economy, Elsevier, vol. 23(1), pages 207-227, March.
    26. David Johnson, 2003. "The Effect of Inflation Targets on the Level of Expected Inflation in Five Countries," The Review of Economics and Statistics, MIT Press, vol. 85(4), pages 1076-1081, November.
    27. Lapp, John S & Pearce, Douglas K, 2000. "Does a Bias in FOMC Policy Directives Help Predict Intermeeting Policy Changes?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 32(3), pages 435-441, August.
    28. Andrew T. Levin & Fabio M. Natalucci & Jeremy M. Piger, 2004. "The macroeconomic effects of inflation targeting," Review, Federal Reserve Bank of St. Louis, vol. 86(Jul), pages 51-80.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Alan S. Blinder, 2008. "Talking about Monetary Policy: The Virtues (and Vices?) of Central Bank Communication," Working Papers 1048, Princeton University, Department of Economics, Center for Economic Policy Studies..
    2. Alan S. Blinder & Michael Ehrmann & Marcel Fratzscher & Jakob De Haan & David-Jan Jansen, 2008. "Central Bank Communication and Monetary Policy: A Survey of Theory and Evidence," Journal of Economic Literature, American Economic Association, vol. 46(4), pages 910-945, December.
    3. Alan S. Blinder & Michael Ehrmann & Marcel Fratzscher & Jakob De Haan & David-Jan Jansen, 2008. "Central Bank Communication and Monetary Policy: A Survey of Theory and Evidence," Journal of Economic Literature, American Economic Association, vol. 46(4), pages 910-945, December.
    4. repec:pri:cepsud:164blinder is not listed on IDEAS
    5. Alan S. Blinder & Michael Ehrmann & Marcel Fratzscher & Jakob De Haan & David-Jan Jansen, 2008. "Central Bank Communication and Monetary Policy: A Survey of Theory and Evidence," Journal of Economic Literature, American Economic Association, vol. 46(4), pages 910-945, December.
    6. repec:pri:cepsud:161blinder is not listed on IDEAS
    7. Marek Rozkrut, 2008. "It’s not only WHAT is said, it’s also WHO the speaker is. Evaluating the effectiveness of central bank communication," NBP Working Papers 47, Narodowy Bank Polski.
    8. Jakob de Haan & David-Jan Jansen, 2009. "The communication policy of the European Central Bank: An overview of the first decade," DNB Working Papers 212, Netherlands Central Bank, Research Department.
    9. Donato Masciandaro & Davide Romelli & Gaia Rubera, 2021. "Monetary policy and financial markets: evidence from Twitter traffic," BAFFI CAREFIN Working Papers 21160, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.
    10. Michael Ehrmann, 2015. "Targeting Inflation from Below: How Do Inflation Expectations Behave?," International Journal of Central Banking, International Journal of Central Banking, vol. 11(4), pages 213-249, September.
    11. van der Cruijsen, C.A.B., 2008. "The economic impact of central bank transparency," Other publications TiSEM 86c1ba91-1952-45b4-adac-8, Tilburg University, School of Economics and Management.
    12. Freddy H. CASTRO, 2012. "Senales de política monetaria y movimientos en la estructura a plazo de la tasa de interés en Colombia," Archivos de Economía 9908, Departamento Nacional de Planeación.
    13. Ancil Crayton, 2018. "Central Bank Communication and the Yield Curve: A Semi-Automatic Approach using Non-Negative Matrix Factorization," Papers 1809.08718, arXiv.org.
    14. Hayo, Bernd & Neuenkirch, Matthias, 2010. "Do Federal Reserve communications help predict federal funds target rate decisions?," Journal of Macroeconomics, Elsevier, vol. 32(4), pages 1014-1024, December.
    15. Jakob Haan, 2008. "The effect of ECB communication on interest rates: An assessment," The Review of International Organizations, Springer, vol. 3(4), pages 375-398, December.
    16. Sheila Dow & Matthias Klaes & Alberto Montagnoli, 2009. "Risk And Uncertainty In Central Bank Signals: An Analysis Of Monetary Policy Committee Minutes," Metroeconomica, Wiley Blackwell, vol. 60(4), pages 584-618, November.
    17. Rodolfo Tomás Da Fonseca Nicolay & Gabriel Caldas Montes, 2014. "Comunicação Do Banco Central,Expectativas De Inflação E Profecia Auto-Realizável: Evidências Para Obrasil," Anais do XL Encontro Nacional de Economia [Proceedings of the 40th Brazilian Economics Meeting] 046, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].
    18. Thiago Cacicedo Cidad & Gabriel Caldas Montes, 2016. "Does Central Bank’S Perception Regarding The State Of The Economy Affect Entrepreneurs’ Expectations? Are Entrepreneurs’ Expectations Important For Investment? Empirical Evidence From Brazil," Anais do XLIII Encontro Nacional de Economia [Proceedings of the 43rd Brazilian Economics Meeting] 035, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].
    19. Monique Reid & Pierre Siklos, 2020. "Building Credibility and Influencing Expectations The Evolution of Central Bank Communication," Working Papers 10144, South African Reserve Bank.
    20. Benjamin Born & Michael Ehrmann & Marcel Fratzscher, 2011. "How Should Central Banks Deal with a Financial Stability Objective? The Evolving Role of Communication as a Policy Instrument," Chapters, in: Sylvester Eijffinger & Donato Masciandaro (ed.), Handbook of Central Banking, Financial Regulation and Supervision, chapter 9, Edward Elgar Publishing.
    21. Jonne Lehtimäki & Marianne Palmu, 2022. "Who Should You Listen to in a Crisis? Differences in Communication of Central Bank Policymakers," Journal of Central Banking Theory and Practice, Central bank of Montenegro, vol. 11(3), pages 33-57.
    22. Lumengo Bonga-Bonga, 2017. "Assessing the Effectiveness of the Monetary Policy Instrument during the Inflation Targeting Period in South Africa," International Journal of Economics and Financial Issues, Econjournals, vol. 7(4), pages 706-713.

    More about this item

    Keywords

    monetary policy;

    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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pri:cepsud:164. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Bobray Bordelon (email available below). General contact details of provider: https://edirc.repec.org/data/ceprius.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.