## Central Bank Communications

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---

### Executive summary: importance and rationale
- Communication is a critical component of monetary policy because it affects market expectations, enhances policy effectiveness, and builds public support for central‑bank independence.
- Drivers:
  - Recognition that communication affects market expectations.
  - Increased demand for detailed information about objectives, decisions, and actions.
  - Enhanced and transparent communications support accountability and independence.
- Contextual challenges:
  - Advanced economies used forward‑guidance when conventional policy space was exhausted after the Global Financial Crisis.
  - Emerging and developing economies face challenges in communicating transitions to different regimes and explaining policy with multiple objectives.
  - Natural resource wealth amplifies communication importance due to frequent terms‑of‑trade shocks and inflation‑output tradeoffs; effective communication is needed to anchor expectations and preserve credibility.

### Observed evolution and core messages
- Central banks have improved communications across advanced, emerging, and developing economies, with more focus on what, to whom, and how to communicate, and on tracking impact.
- Three essential message elements:
  - (i) the policy regime,
  - (ii) the objectives,
  - (iii) the decisions with associated explanations.
- Key target audiences: the general public, media, government, parliament, financial market participants, and central bank “watchers.”
- Objectives of targeting diverse audiences: reinforce transmission mechanism, meet accountability demand, promote financial literacy, and facilitate coordination with other policy authorities.

### Five principles for how to communicate
- Clear and transparent: explain policy objective, framework, and the central bank’s reaction function.
- Tiered messages: target different audiences to reach all relevant population segments.
- Delivered regularly: systematic and pre‑announced timing increases predictability.
- Equal access: make relevant information equally accessible and timely to all target audiences.
- Consistency and institutional association: allow divergent perspectives but avoid contradictory or confusing messages; associate communications with the institution.

### Design recommendations for communication tools and formats
- Monetary Policy Committee (MPC) statement:
  - Retain broadly the same structure across releases.
  - Focus on policy deliberations and economic analysis underpinning decisions.
  - Ideally accompanied by a short presentation to the media (suggested 10 to 15 minutes).
- Press conferences:
  - Held by the governor (or top representative); include opening remarks and a Q&A session; speak in plain language.
  - Prepare by rehearsing with economic and communications staff; prepare likely questions and pre‑drafted answers; agree on handling sensitive questions.
- Monetary Policy Report (MPR):
  - Publish at quarterly frequency (where applicable).
  - Provide in‑depth analysis of developments, rationale for actions, forecasts, risks, and alternative scenarios.
  - Include an executive summary, thematic boxes, forecast evaluations, and statistical appendices.

### Institutional framework and resourcing
- Develop a communications policy and a strategy document detailing objectives, target audiences, messages, channels, tools, responsibilities, budget, and implementation plan.
- Formalize a communications department with written responsibilities and appropriate authority; appoint a communications manager reporting directly to the governor.
- Allocate appropriate financial and human resources and expect specialization across communications teams supporting functional areas.

### Monitoring and assessing communication effectiveness
- Use multiple methodologies and sources; do not rely on a single index.
- Recommended tools:
  - High‑frequency event studies to estimate effects of policy announcements on financial markets and the real economy.
  - Surveys—regular and ad‑hoc—to monitor inflation expectations and the macroeconomic outlook.
  - Media monitoring and objective tonality measurement on a consistent and regular basis.
  - Distance between internal projected policy rates and external forecasters’ projections as an indicator of communication effectiveness.
  - Track intraday asset price changes around announcements (example window: 30 minutes).

### Theoretical and empirical benefits of transparency
- Benefits:
  - Public accountability as the counterpart to operational independence.
  - Policy effectiveness via improved predictability through clear, forward‑looking communication.
- Empirical notes:
  - Cross‑country evidence suggests private sector forecasting errors of policy rates decline with higher transparency.
  - Calculation example in the text: moving from the Reserve Bank of India level of transparency (near bottom in 2010) to Sweden (top) reduces inflation variability by 3 p.p. and inflation by 11 p.p., all else equal.
  - Signal value: 75 to 90 percent of the explainable variation in five‑ and ten‑year Treasury yields around policy announcements is due to signals on future policy intentions (the “path factor”) rather than changes in the overnight rate.
  - Quoted benchmark: “monetary policy is 98 percent talk and only 2 percent actions.”

### What to communicate: content hierarchy and forward guidance
- Content hierarchy:
  - Policy regime: reveal logic behind decisions and define communication role.
  - Objectives: define and quantify objectives implied by the regime (e.g., numerical inflation objective).
  - Methods: reveal analytical framework and modeling confidence.
  - Decisions: announce publicly and immediately; indicate current plans for future decisions while stressing conditionality.
- MPR structure guidance (per Adrian and others, 2018):
  - Repeat at start of each MPR: central bank mandate, numerical inflation objective, general strategy.
  - Constantly update: recent decisions, reasons, assessment of current conditions (including output gap and other inflation drivers), and risks.
- Forward guidance:
  - Conventional: regular publication of quantitative projections for the future policy rate path conditional on the macro forecast; convey uncertainty (e.g., via fan charts).
  - Unconventional: used occasionally or opportunistically (e.g., at the effective lower bound).
  - Two types: “Delphic” (announce expected future path) and “Odyssean” (conditional commitment).
  - Tradeoff: publishing an endogenous policy‑rate path can be misunderstood as a commitment; ensure forecasts are clearly conditional on the macro forecast.

### To whom to communicate: audience segmentation
- Primary audiences and priorities:
  - General public and media: accountability, financial literacy, broad understanding.
  - Government and parliament: accountability and policy coordination.
  - Financial market participants: primary transmission channel; clarify intentions to smooth transmission.
  - Expert central bank “watchers”: independent interpreters who can amplify or distort messages.
  - Internal staff: internal ambassadors to transmit and reinforce messages.
  - International audience: mitigate spillovers and attract foreign investors; share relevant information internationally.

### How to communicate: style, frequency, and channels
- Tailor principles to country idiosyncrasies (literacy, culture, history).
- Use plain language, avoid unnecessary technical terms, and provide explanations when technical terms are necessary.
- Instruments and operational guidance:
  - Observe regularity and a pre‑announced calendar for statements, press conferences, and MPRs.
  - Implement a communications blackout period starting at least one week before MPC meetings during which public commentary on monetary and FX policy is refrained from.
  - Publish MPC decisions the same day meetings conclude.
  - Statements should follow a rigid structure (headline, key messages, summary of inflation developments, summary of economic developments, summary of key considerations).
  - Time lag between decision announcement and press conference should be fixed and ideally no later than one week.
  - Press presentations should mirror the statement structure and include content anticipating media questions.
- Channels:
  - Press releases, press conferences (presentation + Q&A), website (tiered content, FAQ, visual tools), social media (quick messages, monitoring), interviews, op‑eds, background briefings, newsletters, and public speeches.

### Special issues in low‑income resource‑rich countries
- Challenges:
  - Natural resource revenues create fiscal space but increase exposure to external shocks and terms‑of‑trade volatility.
  - Recurrent FX interventions complicate the environment; communications must clarify objectives and coordination with fiscal authorities.
  - Public focus on exchange rate rather than inflation can complicate transitions to flexible exchange rate/modernized frameworks.
  - High food weight in CPI means core inflation measures excluding food/energy may understate living‑cost pressures.
- Policy communication strategies:
  - Build credibility and anchor inflation expectations to allow temporary deviations from target while communicating a credible return path.
  - Use official documents (e.g., MPR) to discuss exchange rate movements and implications of both appreciation and depreciation.
  - Use transparent alternative scenarios (e.g., higher food prices, negative terms‑of‑trade shock) to reveal the reaction function and enhance predictability.

### Institutional aspects: communications policy, strategy, and department
- Distinguish communications policy (high‑level principles) and communications strategy (operational aspects); publishing a strategy can aid transitions.
- Communications department best practices:
  - Appoint a communications manager reporting directly to the governor and include as an observer in high‑level meetings.
  - Formalize the function with written responsibilities and authority; ensure consultation with communications specialists.
  - Core functions (from Table 3): Media Relations, Public Affairs, Internal Communications, Speech Writers, Digital Communications, Editorial.
  - Monitor media and survey public opinion beyond counting mentions; analyze media reactions to adjust publications.

### Assessing impact: data, event studies, and text analysis
- A. Data:
  - Collect proactive, high‑frequency data from multiple sources; run regular and ad‑hoc surveys of expectations (policy rates, GDP growth, inflation, exchange rate).
  - Track intraday asset price changes and digitalize news articles related to announcements.
  - Avoid storing excessive data whose maintenance costs exceed benefits.
- B. Event studies:
  - Measure changes in interest rates, market‑based inflation expectations, exchange rate, equity prices, and other asset prices over narrow windows (example: 30 minutes) around announcements to isolate effects.
  - Compare expected effects with event‑study estimates to refine wording and instruments.
- C. Computerized text‑analysis tools:
  - Construct tone metrics from word counts distinguishing positive and negative language.
  - Use to estimate impacts on variables analyzed in event studies and to evaluate media tone.
  - A mismatch between central bank tone and media tone signals bottlenecks needing attention.

*Source: central-bank-communications - EXECUTIVE SUMMARY and Chapters I–IX (IMF | MCM Technical Assistance Handbook).*

### EXECUTIVE SUMMARY ___________________________________________________________________________________5

### EXECUTIVE SUMMARY

### I. CONTEXT AND ISSUE
- Section title listed: "I. CONTEXT AND ISSUE" (page reference indicated in table of contents: 7).

### II. WHY COMMUNICATE?
- Section title listed: "II. WHY COMMUNICATE?" (page reference indicated in table of contents: 8).

### III. WHAT TO COMMUNICATE?
- Section title listed: "III. WHAT TO COMMUNICATE?" (page reference indicated in table of contents: 11).

### IV. TO WHOM TO COMMUNICATE?
- Section title listed: "IV. TO WHOM TO COMMUNICATE?" (page reference indicated in table of contents: 14).

### V. HOW TO COMMUNICATE?
- Section title listed: "V. HOW TO COMMUNICATE?" (page reference indicated in table of contents: 15).

### VI. MONETARY POLICY COMMUNICATION TOOLS
- Section title listed: "VI. MONETARY POLICY COMMUNICATION TOOLS" (page reference indicated in table of contents: 17).
- Subsections enumerated in source:
  - A. Monetary Policy Statement (page reference: 19)
  - B. Press Conferences (page reference: 20)
  - C. Monetary Policy Report (page reference: 21)
  - D. Website (page reference: 22)
  - E. Social Media (page reference: 22)

### VII. ISSUES IN LOW-INCOME RESOURCE-RICH COUNTRIES
- Section title listed: "VII. ISSUE S IN LOW-INCOME RESOURCE-RICH COUNTRIES" (page reference indicated in table of contents: 23).

### VIII. INSTITUTIONAL ASPECTS OF COMMUNICATION
- Section title listed: "VIII. INSTITUTIONAL ASPECTS OF COMMUNICATION" (page reference indicated in table of contents: 25).
- Subsections enumerated in source:
  - A. Communication Policy and Strategy (page reference: 25)
  - B. The Communications Department (page reference: 26)

### IX. ASSESSING THE IMPACT OF COMMUNICATION
- Section title listed: "IX. ASSESSING THE IMPACT OF COMMUNICATION" (page reference indicated in table of contents: 28).
- Subsections enumerated in source:
  - A. Data (page reference: 29)
  - B. Event Studies (page reference: 30)
  - C. Computerized Text-Analysis Tools (page reference: 31)

### Boxes, Figures, and Tables listed in the source
- Boxes:
  - 1. Communications Strategy Document (listed page: 26)
  - 2. Evaluating the Anchoring of Inflation Expectations (listed page: 30)
- Figures:
  - 1. Policy Forecast Errors and Central Bank Transparency (listed page: 10)
- Tables:
  - 1. Communication Channels (listed page: 18)
  - 2. Suggested Structure for the Monetary Policy Statement (listed page: 20)
  - 3. Functions of a Central Bank Communications Department (listed page: 27)

### Glossary entries shown in the source
- BoE Bank of England
- CPI Consumer Price Index
- ECB European Central Bank
- FOMC Federal Reserve Open Market Committee
- GFC Global Financial Crisis
- IMF International Monetary Fund
- MCM Monetary and Capital Markets Department
- MPC Monetary Policy Committee
- MPR Monetary Policy Report
- TA Technical Assistance

*Source: central-bank-communications - EXECUTIVE SUMMARY (IMF | MCM Technical Assistance Handbook), as listed in the provided content.*

### Executive Summary

### Executive Summary

### Importance and rationale for central bank communication
- Good and effective central bank communication has become a critical component of monetary policy.
- Factors driving the trend:
  - Recognition that communication affects market expectations.
  - Increased demand by experts and the public for detailed information about objectives, decisions, and actions.
  - Realization that communication improves the effectiveness of monetary policy and helps build public support for central‑bank independence.
  - Enhanced and transparent communications support accountability and ultimately independence.
- Communication challenges vary across countries and regimes:
  - Advanced economies used forward‑guidance when conventional policy space was exhausted after the Global Financial Crisis.
  - Emerging market and developing economies face challenges such as communicating transitions to different monetary policy regimes and explaining policy when multiple objectives exist.
- Natural resource wealth amplifies communication importance:
  - Frequent terms‑of‑trade shocks can create tradeoffs between inflation and output.
  - Letting inflation drift temporarily may be viable only if inflation expectations are well anchored, requiring effective communication to enhance credibility.

### Observed evolution and focus areas
- Central banks across advanced, emerging, and developing economies have improved communications.
- Greater attention to what, to whom, and how to communicate, accompanied by efforts to track the impact of communication.
- Three essential message elements:
  - (i) the policy regime,
  - (ii) the objectives,
  - (iii) the decisions with associated explanations.
- Key target audiences include: the general public, media, government, parliament, financial market participants, and central bank “watchers.”
- Objectives of addressing diverse audiences: reinforce transmission mechanism, meet accountability demand, promote financial literacy, and facilitate coordination with other policy authorities.

### Five key principles for how to communicate
- Clear and transparent: explain policy objective and framework and the central bank’s reaction function.
- Tiered messages: target different audiences to reach all relevant population segments.
- Delivered regularly: systematic and pre‑announced timing increases predictability.
- Equal access: make relevant information equally accessible and timely to all target audiences.
- Consistency and institutional association: allow for divergent perspectives, but avoid contradictory or confusing messages; associate communications with the institution.

### Design recommendations for communication tools and formats
- Monetary Policy Committee (MPC) statement:
  - Retain broadly the same structure across releases.
  - Focus on policy deliberations and economic analysis underpinning decisions.
  - Ideally accompanied by a short presentation to the media (suggested 10 to 15 minutes in later detail).
- Press conferences:
  - Held by the governor (or top representative), speaking in plain language and stressing key messages; include opening remarks and a Q&A session.
  - Preparation: rehearse with economic and communications staff; prepare likely questions and pre‑drafted answers; agree on handling sensitive questions.
- Monetary Policy Report (MPR):
  - Publish at quarterly frequency (where applicable).
  - Complement statements and press conferences with in‑depth analysis of developments, rationale for policy actions, forecasts, risks, and alternative scenarios.
  - Include an executive summary, thematic boxes, forecast evaluations, and statistical appendices.

### Institutional framework and resourcing
- Develop a communications policy and a strategy document detailing objectives, target audiences, messages, channels, tools, responsibilities, budget, and an implementation plan.
- Define communication department structure and allocate appropriate financial and human resources.
- Communication unit ideally consists of specialized teams supporting different functional areas.

### Monitoring and assessing communication effectiveness
- Use multiple methodologies and sources:
  - High‑frequency event studies to estimate effects of policy announcements on financial markets and the real economy.
  - Study inflation expectations—particularly long‑term expectations—to measure credibility.
  - Monitor media coverage and tonality; tonality should be measured objectively on a consistent and regular basis.
  - Use surveys to evaluate impact on different stakeholders and gather opinions on monetary policy.

### Theoretical and empirical benefits of transparency
- Transparency provides two main benefits:
  - Public accountability as the counterpart to operational independence.
  - Policy effectiveness by improving predictability through clear, forward‑looking communication.
- Predictability enhances the ability to influence medium‑ and long‑term rates and thus spending decisions.
- Cross‑country evidence (referenced in text) suggests that private sector forecasting errors of policy rates decline with higher transparency.
  - Calculation example presented: moving from the level of transparency of the Reserve Bank of India (near the bottom in 2010) to that of Sweden (top of the pack) reduces inflation variability by 3 p.p. and inflation by 11 p.p., all else equal.
- Signal value of policy communication:
  - Authors find that 75 to 90 percent of the explainable variation in five‑ and ten‑year Treasury yields in response to policy announcements is due to signals on future policy intentions (the “path factor”) rather than changes in the overnight rate.

### What to communicate (content hierarchy and forward guidance)
- Policy regime: reveal the logic behind policy decisions and define communication role.
- Objectives: define and quantify objectives implied by the regime (e.g., numerical inflation objective in inflation targeting).
- Methods: reveal analytical framework and modeling confidence.
- Decisions: announce decisions publicly and immediately; complement with indications of current plans for future decisions while stressing conditionality.
- Content hierarchy for MPRs (per Adrian and others, 2018):
  - Essential information to repeat at start of each MPR: central bank mandate, numerical inflation objective, and general strategy.
  - Constantly updated information: recent decisions, reasons behind them, assessment of current conditions (including output gap and other drivers of inflation), and risks.
- Forward guidance:
  - Conventional forward guidance: regular publication of quantitative projections for the future policy rate path, conditional on information at the time of the forecast; uncertainty should be conveyed (e.g., via fan charts).
  - Unconventional forward guidance: used occasionally or opportunistically (e.g., when at effective lower bound).
  - Two types of forward guidance: “Delphic” (announce expected future path) and “Odyssean” (conditional commitment).
  - Tradeoffs: publishing an endogenous policy‑rate path can be misunderstood as a commitment; central banks should ensure forecasts are clearly conditional on their macroeconomic forecast.

### To whom to communicate (audience segmentation)
- Audiences and communication priorities:
  - General public and media: accountability, financial literacy, and broad public understanding.
  - Government and parliament: accountability and policy coordination.
  - Financial market participants: primary transmission channel; clarify intentions to smooth transmission.
  - Expert central bank “watchers”: independent interpreters who can amplify or distort messages; maintain good relationships.
  - Internal staff: internal ambassadors who transmit and reinforce messages.
  - International audience: address to mitigate spillovers and attract foreign investors; share relevant information with the international community.

### How to communicate (style, frequency, and channels)
- Tailor universal principles to country idiosyncrasies (literacy, culture, history).
- Public outreach: speeches, lectures, media opportunities to raise awareness.
- Use plain language, avoid unnecessary technical terms, and provide explanations where technical terms are necessary.
- Ensure communications are consistent with a well‑defined policy framework and consistent policy conduct.
- Communication instruments and practical guidance:
  - Observe regularity and a pre‑announced calendar for statements, press conferences, and MPRs.
  - Implement a communications blackout period starting at least one week before MPC meetings during which public commentary on monetary and FX policy is refrained from.
  - Ensure all publications are clearly structured, focus on telling a story (not only numbers), and include statistical appendices on the website.

### Monetary policy communication tools (summary)
- Press release: communicate policy decisions, new regulations, and comments on relevant data.
- Press conference: provide a presentation and Q&A to clarify and amplify messages.
- Website: primary public information source; tiered content for different audiences; FAQ, visual explanations, data tools.
- Social media: deliver quick messages in simple language and monitor public trends; requires resources and internal governance.
- Interviews, op‑eds, meetings with analysts, background briefings for journalists, newsletters, and public speeches as complementary channels.
- Specific operational recommendations:
  - Publish MPC decisions the same day meetings conclude.
  - Statements should follow a rigid structure (headline, key messages, summary of inflation developments, summary of economic developments, summary of key considerations).
  - The time lag between decision announcement and press conference should be fixed and ideally no later than one week.
  - Press presentations should mirror the statement structure and include content anticipating media questions.

### Special issues in low‑income resource‑rich countries
- Natural resource revenues create fiscal space but expose economies to external shocks and terms‑of‑trade volatility.
- Recurrent FX interventions complicate the environment; communication must clarify objectives and coordination.
- Transitioning to a flexible exchange rate/modernized monetary framework is challenging due to public focus on the exchange rate versus inflation.
- Terms‑of‑trade shocks can create inflation‑output tradeoffs:
  - Example: a negative terms‑of‑trade shock may lead to high inflation and weak activity, posing conflicting signals for policy tightening versus easing.
  - Strategy: build credibility and anchor inflation expectations so the central bank can allow temporary deviations from target while communicating a credible return path to target.
- Political pressures are magnified by resource revenues (fiscal spending pressures, “Dutch Disease”); communication is vital to explain central bank roles and actions.
- Exchange rate commentary:
  - Use official documents (e.g., MPR) to discuss exchange rate movements and consistency with fundamentals.
  - Discuss implications of both appreciation and depreciation to avoid one‑directional bias.
- High food weight in CPI in low‑income countries complicates headline inflation interpretation:
  - Core inflation measures excluding food/energy may understate cost of living if structural shifts raise relative food prices.
- Alternative scenarios:
  - Use transparent alternative scenarios to show how policy would react to deviations (e.g., higher food prices, negative terms‑of‑trade shock) to reveal the reaction function and enhance predictability.

### Institutional aspects of communication
- Treat communication as a powerful policy instrument requiring formal institutional foundations.
- Distinguish (where appropriate) between communications policy (high‑level principles) and communications strategy (operational aspects); some institutions combine them.
- Publishing a communications strategy/policy can be beneficial for central banks transitioning to new frameworks to enhance credibility and organize internal outreach.

*Source: Monetary Operations and Domestic Market Development – Central Bank Communications, IMF | MCM Technical Assistance Handbook, Executive Summary and Chapters I–VIII.*

### Box 1. Communications Strategy Document

### Box 1. Communications Strategy Document

### INTRODUCTION
- Mandate of the Central Bank
- Objectives of the Communication Strategy
- Principles of Communication

### MONETARY POLICY
- Role of Communications in Monetary Policy
- The Inflation Mandate
- The Monetary Policy Decision-Making Process
- Who Makes Monetary Policy Decisions?
- When Are Monetary Policy Decisions Made?
- Forecasting and Policy Assessment System

### MONETARY POLICY COMMUNICATIONS—PROCESS AND OPERATIONS
- Monetary Policy Spokespersons
- Preparation of Communications Documents
- General Monetary Policy Communication
- Monetary Policy Communication Practices
- The Calendar of Decisions and Announcements
- A Press Release on Each Monetary Policy Decision
- A Press Conference
- Quarterly Monetary Policy Reports
- Ongoing Monetary Policy Communication

### FINANCIAL STABILITY COMMUNICATIONS
- Financial Stability Mandate
- Financial System Stability Committee
- Objectives
- Spokespersons on Financial Stability
- Strengthening Communications on Financial Stability and Macroprudential Policy
- Annual Press Conference on Financial System Stability
- Semi-Annual Press Release by the Financial System Stability Committee

### KEY AUDIENCES AND METHODS OF ENGAGEMENT
- Bank Staff
- The Media
- The General Public
- The Financial Sector
- The Business Sector
- Government, Parliament, Municipalities
- Academia and Students

### STRENGTHENING COMMUNICATIONS FUNCTION
- Assessment of Communications

### B. THE COMMUNICATIONS DEPARTMENT
- Best practice: appoint a communication manager reporting directly to the governor and give the role a permanent seat as an observer in high-level strategy and policy meetings to remain informed about all policies and activities.
- Formalize the communications function as a department or division with written responsibilities and corresponding authority to ensure other divisions consult communications specialists on policy communication and publication.
- Allocate appropriate financial and human resources; expect specialization among communications specialists to support different functional areas and actively participate in the communication and publication processes.
- Communications division responsibilities: lead drafting of publications, while functional areas provide relevant input and material.
- Regularly monitor media and occasionally survey public opinion; go beyond counting media mentions to follow up on media reactions to monetary policy decisions to adjust publications’ structure and content over time.

Key functions of a Central Bank Communications Department (from Table 3)
- Media Relations: Manages all interactions with media and fosters working relationships with journalists; advises management and senior staff on media interactions; drafts, reviews, and issues press releases; organizes regular press briefings; monitors and disseminates news to management and staff; provides analysis of news trends, including public reception of communications.
- Public Affairs: Develops and fosters outreach to non-media counterparties, including legislators, academics, experts (including financial market participants), civil society, think tanks, and the general public.
- Internal Communications: Helps foster staff engagement and community building through intranet news space, town halls, seminars, and meetings with management; communicates management decisions on organizational restructuring or other delicate issues.
- Speech Writers: Draft and edit speeches for the governor and board members, drawing on inputs from various departments and shaping a final product consistent with overall policy messages and personal style.
- Digital Communications: Manages the external website and digital platforms, such as Facebook and Twitter; scope includes web design; packaging and updating news and outreach content on websites and digital channels; social media messaging; live webcasting; and gathering and analyzing data.
- Editorial: Drafts and edits periodicals, occasional publications, and published documents, including on the website.

### IX. ASSESSING THE IMPACT OF COMMUNICATION
- Rationale:
  - Monetary policy communication steers market expectations and improves predictability.
  - Quoted benchmark: former Federal Reserve Chairman Ben Bernanke: “monetary policy is 98 percent talk and only 2 percent actions.”
- Regular evaluation of communication outcomes informs policymakers about potential confusion regarding the policy framework and reaction function.
- If decisions systematically surprise markets, the central bank should better explain the rationale of decisions to improve predictability and strengthen policy effects.
- Assessment helps identify best channels for different stakeholders and calibrate communication tools (verbal vs. written).
- Evaluation is challenging; there is no single agreed method and the field is fast-evolving with big data and advanced analytical tools.
- Guideline: do not rely on a single index; extract information from several sources (asset prices, surveys) to obtain comprehensive assessment.

### A. DATA
- Proactive data collection from several sources at the highest frequency possible is essential; analytical assessment depends on data quantity and quality.
- Run surveys regularly and on an ad-hoc basis; monitoring expectations on the macroeconomic outlook (particularly inflation expectations) is a priority.
- Surveys should cover policy rates and key macrofinancial variables: GDP growth, inflation, and the exchange rate.
- Even if another agency runs inflation expectations surveys, the central bank should be active in questionnaire design and respondent selection.
- Example benchmark: “Survey of Consumer Expectations” by the Federal Reserve Bank of New York (Bruine de Bruin and others, 2010).
- Data collection should include macrofinancial data and news articles; avoid storing excessive data whose maintenance costs might exceed benefits.
- Track intraday asset price changes around key monetary policy communications and digitalize news articles related to announcements.
- Use collected information to assess clarity of reaction function across stakeholders and degree of tiering needed to reach audiences.
- Examples of measures:
  - Distance between internal projected policy rates and external forecasters’ projections as a measure of communication effectiveness.
  - Diverging inflation expectations between domestic and foreign agents after announcements may signal communication shortcomings; inclusion of foreign recipients can help discern language-related discrepancies.

### Box 2. Evaluating the Anchoring of Inflation Expectations
- Monitoring inflation expectations is a priority; assess both level relative to central bank target and dispersion of expectations.
- Key metrics used to infer degree of anchoring (following IMF (2018b)):
  (i) absolute deviations in inflation expectations from the central bank target;
  (ii) variability of inflation expectations over time;
  (iii) dispersion of inflation expectations across individual forecasters or stakeholders; and
  (iv) sensitivity of inflation expectations to surprises about current inflation.
- Higher values of these metrics indicate less well anchored inflation expectations.

### B. EVENT STUDIES
- Use macrofinancial data to estimate effects of monetary policy communication via event studies: measure changes in interest rates, market-based inflation expectations, exchange rate, equity prices, and other asset prices over a short interval (for example 30 minutes) around key announcements.
- Advantages: reliable estimates and flexibility; narrow time windows help isolate announcement effects from other news.
- Allows assessment of effectiveness across communication instruments (press release, inflation report, speeches).
- Systematically compare expected effects on key variables with those estimated from event studies to guide wording refinements.
- Assess differences in reaction of asset prices and expectations to learn how audiences respond, including foreign market participants; analyze co-movement between interest rates and macroeconomic variables across horizons to gauge foreign investor reception.

### C. COMPUTERIZED TEXT-ANALYSIS TOOLS
- Computerized text-analysis tools measure tone and effects of monetary policy by constructing metrics from word counts distinguishing positive and negative language.
- These indicators are used to estimate impact on variables typically analyzed in event studies.
- Also used to evaluate tone of media coverage to determine whether specific messages were effectively delivered.
- A discrepancy between positive tone in central bank communications and media tone signals bottlenecks in communication framework and modes.

*Source: Box 1. Communications Strategy Document, central-bank-communications (IMF | MCM Technical Assistance Handbook).*

### References

### central-bank-communications - References

### Books, Monographs, and Edited Volumes
- Adrian, Tobias, Douglas Laxton, and Maurice Obstfeld, eds., (2018), Advancing the Frontiers of Monetary Policy. (Washington, DC: International Monetary Fund).
- Bernanke, Ben S., Thomas Laubach, Frederic S. Mishkin, and Adam S. Posen, (1999), Inflation Targeting: Lessons from the International Experience. (Princeton, New Jersey: Princeton University Press).
- Blinder, Alan S., (1998), Central Banking in Theory and Practice. (Cambridge, Massachusetts: MIT Press).
- Blinder, Alan S., (2004), The Quiet Revolution: Central Banking Goes Modern. (New Haven, Connecticut: Yale University Press).
- Blinder, Alan S., Charles Goodhart, Philipp Hildebrand, David Lipton, and Charles Wyplosz, (2001), “How Do Central Banks Talk?” Geneva Reports on the World Economy, 3, (Geneva: International Center for Monetary and Banking Studies and London: Centre for Economic Policy Research).
- Geraats, Petra M., (2014), “Monetary Policy Transparency.” in The Oxford Handbook of Economic and Institutional Transparency, ed. by Jens Forssbæck and Lars Oxelheim, Chapter 3, (Oxford: Oxford University Press).
- Rudebusch, Glenn D., and John C. Williams, (2008), “Revealing the Secrets of the Temple: The Value of Publishing Central Bank Interest Rate Projections.” in Asset Prices and Monetary Policy, ed. by John Y. Campbell, Chapter 6, pp. 247–289, (Chicago: University of Chicago Press).

### Journal Articles, Working Papers, and Surveys
- Barro, Robert J., (1976), “Rational Expectations and the Role of Monetary Policy.” Journal of Monetary Economics, Vol. 2, No. 1, pp. 1–32.
- Bruine de Bruin, Wändi, Simon Potter, Robert W. Rich, Giorgio Topa, and Wilbert van der Klaauw, (2010), “Improving Survey Measures of Household Inflation Expectations.” Current Issues in Economics and Finance, Vol. 16, No. 7.
- Campbell, Jeffrey R., Charles L. Evans, Jonas D.M. Fisher, Alejandro Justiniano, Charles W. Calomiris, and Michael Woodford, (2012), "Macroeconomic Effects of Federal Reserve Forward Guidance [with Comments and Discussion]." Brookings Papers on Economic Activity, pp. 1-80.
- Dincer, N. Nergiz, and Barry Eichengreen, (2014), “Central Bank Transparency and Independence: Updates and New Measures.” International Journal of Central Banking, Vol. 10, No. 1, pp. 189–259.
- Geraats, Petra M., (2009), “Trends in Monetary Policy Transparency.” International Finance, Vol. 12, No. 2, pp. 235–268.
- Gürkaynak, Refet S., Brian Sack, and Eric T. Swanson, (2005), “Do Actions Speak Louder Than Words? The Response of Asset Prices to Monetary Policy Actions and Statements.” International Journal of Central Banking, Vol. 1, No. 1, pp. 55–93.
- Jarociński, Marek, and Peter Karadi, (2018), “Deconstructing Monetary Policy Surprises: The Role of Information Shocks.” ECB Working Paper Series No. 2133, (European Central Bank, Frankfurt, Germany).
- Levin, Andrew T., (2014), “The Design and Communication of Systematic Monetary Policy Strategies.” Journal of Economic Dynamics and Control, Vol. 49, pp. 52–69.
- Lucas, Robert E., Jr., (1972), “Expectations and the Neutrality of Money.” Journal of Economic Theory, Vol. 4, No. 2, pp. 103–124.
- Lucas, Robert E., Jr., (1973), “Some International Evidence on Output-Inflation Tradeoffs.” American Economic Review, Vol 63, No. 3, pp. 326–334.
- Mathur, Aakriti, and Rajeswari Sengupta, (2019), "Analysing Monetary Policy Statements of the Reserve Bank of India." IHEID Working Paper No. 08-2019, (Graduate Institute of International and Development Studies, Geneva, Switzerland).
- Moessner, Richhild, David-Jan Jansen, and Jakob de Haan, (2017), “Communication About Future Policy Rates in Theory and Practice: A Survey.” Journal of Economic Surveys, Vol. 31, No. 3, pp. 678–711.
- Phan, Tuan, (2013), “Should Central Banks Publish Interest Rate Forecasts? - A Survey.” MPRA Paper No. 44676, (University Library of Munich, Germany).

### IMF and Central Bank Reports, Chapters, and Case Studies
- Freedman, Charles, and Douglas Laxton, (2009), “Why Inflation Targeting?” IMF Working Paper 09/86, (International Monetary Fund, Washington, D.C.).
- Gaspar, Vitor, Maurice Obstfeld, Ratna Sahay, Douglas Laxton, Dennis Botman, Kevin Clinton, Romain Duval, Kotaro Ishi, Zoltan Jakab, Laura Jaramillo Mayor, Constant Lonkeng Ngouana, Tommaso Mancini Griffoli, Joannes Mongardini, Susanna Mursula, Erlend Nier, Yulia Ustyugova, Hou Wang, and Oliver Wuensch, (2016), “Macroeconomic Management When Policy Space is Constrained: A Comprehensive, Consistent, and Coordinated Approach to Economic Policy.” IMF Staff Discussion Note 16/09, (International Monetary Fund, Washington D.C.).
- Heenan, Geoffrey, Marcel Peter, and Scott Roger, (2006), “Implementing Inflation Targeting: Institutional Arrangements, Target Design, and Communications.” IMF Working Paper 06/278, (International Monetary Fund, Washington, D.C.).
- International Monetary Fund, (2018a), “Credibility, Communication, and Monetary Policy Procyclicality in Latin America.” in Regional Economic Outlook: Western Hemisphere, Chapter 3, Washington, D.C., April.
- International Monetary Fund, (2018b), “Challenges for Monetary Policy in Emerging Markets as Global Financial Conditions Normalize.” in World Economic Outlook, Chapter 3, Washington, DC, October.
- McMahon, Michael, Alfred Schipke, and Xiang Li, (2018), “China’s Monetary Policy Communication: Frameworks, Impact, and Recommendations.” IMF Working Paper 18/244, (International Monetary Fund, Washington, D.C.).
- Czech National Bank, (2015), Central Bank Monitoring. Prague, September.

### Theory, Policy, and Commentary Pieces
- Blinder, Alan S., Michael Ehrmann, Marcel Fratzscher, Jakob de Haan, and David-Jan Jansen, (2008), “Central Bank Communication and Monetary Policy: A Survey of Theory and Evidence.” ECB Working Paper Series No. 898, (European Central Bank, Frankfurt, Germany).
- Mishkin, Frederic S., (2004), “Can Central Bank Transparency Go Too Far?” in The Future of Inflation Targeting, ed. by Christopher Kent and Simon Guttmann, pp. 48–65, (Sydney: Reserve Bank of Australia).
- Moessner, Richhild, David-Jan Jansen, and Jakob de Haan, (2017), “Communication About Future Policy Rates in Theory and Practice: A Survey.” Journal of Economic Surveys, Vol. 31, No. 3, pp. 678–711.
- Woodford, Michael, (2001), “Monetary Policy in the Information Economy.” Paper presented at the Federal Reserve Bank of Kansas Jackson Hole Economic Policy Symposium, Jackson Hole, Wyoming, August.
- Woodford, Michael, (2005), “Central Bank Communication and Policy Effectiveness.” Paper presented at the Federal Reserve Bank of Kansas Jackson Hole Economic Policy Symposium, Jackson Hole, Wyoming, August.
- Woodford, Michael, (2008), “Forward Guidance for Monetary Policy: Is it Still Possible?” VOX, CEPR Policy Portal, January 17, 2008. http://voxeu.org/article/forward-guidance-monetary-policy-it-still-possible.
- Gürkaynak, Refet S., Brian Sack, and Eric T. Swanson, (2005), “Do Actions Speak Louder Than Words? The Response of Asset Prices to Monetary Policy Actions and Statements.” International Journal of Central Banking, Vol. 1, No. 1, pp. 55–93.

*References — central-bank-communications*

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_Source: https://www.imf.org/-/media/files/publications/miscellaneous/english/2022/mcm-technical-assistance-handbook/central-bank-communications.pdf_