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Strategic Central Bank Communication: Discourse and Game-Theoretic Analyses of the Bank of Japan's Monthly Report

Author

Listed:
  • Kohei Kawamura

    (University of Edinburgh)

  • Yohei Kobashi

    (Waseda University)

  • Masato Shizume

    (Waseda University)

  • Kozo Ueda

    (Waseda University and Centre for Applied Macroeconomic Analysis (CAMA))

Abstract

We conduct a discourse analysis of the Bank of Japan's Monthly Report and examine its characteristics in relation to business cycles. We find that the difference between the number of positive and negative expressions in the reports leads the leading index of the economy by approximately three months, which suggests that the central bank's reports have some superior information about the state of the economy. Moreover, ambiguous expressions tend to appear more frequently with negative expressions. Using a simple persuasion game, we argue that the use of ambiguity in communication by the central bank can be seen as strategic information revelation when the central bank has an incentive to bias the reports (and hence beliefs in the market) upwards.

Suggested Citation

  • Kohei Kawamura & Yohei Kobashi & Masato Shizume & Kozo Ueda, 2016. "Strategic Central Bank Communication: Discourse and Game-Theoretic Analyses of the Bank of Japan's Monthly Report," UTokyo Price Project Working Paper Series 062, University of Tokyo, Graduate School of Economics.
  • Handle: RePEc:upd:utppwp:062
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    References listed on IDEAS

    as
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    Cited by:

    1. Irving Fisher Committee, 2017. "Big Data," IFC Bulletins, Bank for International Settlements, number 44, Autumn.
    2. Giuseppe Bruno, 2017. "Central Bank Communications: information extraction and semantic analysis," IFC Bulletins chapters, in: Bank for International Settlements (ed.),Big Data, volume 44, Bank for International Settlements.
    3. Donato Masciandaro & Davide Romelli & Gaia Rubera, 2020. "Tweeting on Monetary Policy and Market Sentiments: The Central Bank Surprise Index," BAFFI CAREFIN Working Papers 20134, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.
    4. Donato Masciandaro & Davide Romelli, 2016. "From Silence to Voice: Monetary Policy, Central Bank Governance and Communication," BAFFI CAREFIN Working Papers 1627, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.

    More about this item

    Keywords

    monetary policy; transparency; natural language processing; modality; latent Dirichlet allocation (LDA); verifiable disclosure model;

    JEL classification:

    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination

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