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Impact of the Central Bank's Communication on Macrofinancial Outcomes

Author

Listed:
  • Tetiana Yukhymenko

    (National Bank of Ukraine)

  • Oleh Sorochan

    (National Bank of Ukraine)

Abstract

This study explores the impact of central bank communications on a range of macrofinancial 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 do indeed 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 larger for volatility than for exchange rate changes. The impact of communication on FX developments is strongest a week after a news release, and it persists further. Furthermore, the inflation expectations of financial experts, though indifferent to NBU updates overall, turn out to be sensitive to monetary policy announcements. The latter reduces the level of expectations and interest rate movement.

Suggested Citation

  • Tetiana Yukhymenko & Oleh Sorochan, 2024. "Impact of the Central Bank's Communication on Macrofinancial Outcomes," Working Papers 01/2024, National Bank of Ukraine.
    • Handle: RePEc:ukb:wpaper:01/2024
    as

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    References listed on IDEAS

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    More about this item

    Keywords

    central bank communications; monetary policy; FX market; text analysis;
    All these keywords.

    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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