Literature Survey on Communication and Monetary Policy

Alan Blinder et al have written a wonderful paper on central bank communications. Alan Blinder has been educating us so much about different aspects of monetary policy and this is another paper.

Over the last two decades, communication has become an increasingly important aspect of monetary policy. These real-world developments have spawned a huge new scholarly literature on central bank communication—mostly empirical, and almost all of it written in this decade. We survey this ever-growing literature. The evidence suggests that communication can be an important and powerful part of the central bank’s toolkit since it has the ability to move financial markets, to enhance the predictability of monetary policy decisions, and potentially to help achieve central banks’ macroeconomic objectives. However, the large variation in communication strategies across central banks suggests that a consensus has yet to emerge on what constitutes an optimal communication strategy.

The paper covers all aspects of central bank communications. The focus is on Fed, ECB and Bank of England but covers works in other central banks as well.

  • Why should central banks communicate?
  • Why is communication seen as a tool of mon pol?
  • How Central Banks communicate?
  • Whose communication is more effective?
  • Impact of communications on fin markets, inflation expectations, inflation, inflation persistence etc etc

A very rich paper. I just don’t know how to cover it. Just like the paper on central bank independence it covers many issues, However, is more neutral than the CBI paper.

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