Arbeitspapier
Central bank communication that works: Lessons from lab experiments
We use controlled laboratory experiments to test the causal effects of central bank communication on economic expectations and to distinguish the underlying mechanisms of those effects. In an experiment where subjects learn to forecast economic variables, we find that central bank communication has a stabilizing effect on individual and aggregate outcomes and that the size of the effect varies with the type of communication. Announcing past interest rate changes has the largest effect, reducing individual price and expenditure forecast volatility by one- and two-thirds, respectively; cutting half of inflation volatility; and improving price-level stability. Forward-looking announcements in the form of projections and forward guidance of upcoming rate decisions have less effect on individual forecasts, especially if they do not clarify the timing of future policy changes. Our evidence does not link the effects of communication to forecasters' ability to predict future nominal interest rates. Rather, communication is effective via simple and relatable backward-looking announcements that exert strong influence on less-accurate forecasters. We conclude that increasing the accessibility of central bank information to the general public is a promising direction for improving central bank communication.
- Language
-
Englisch
- Bibliographic citation
-
Series: Bank of Canada Staff Working Paper ; No. 2019-21
- Classification
-
Wirtschaft
Expectations; Speculations
Monetary Policy
- Subject
-
Monetary policy implementation
Transmission of monetary policy
- Event
-
Geistige Schöpfung
- (who)
-
Kryvtsov, Oleksiy
Petersen, Luba
- Event
-
Veröffentlichung
- (who)
-
Bank of Canada
- (where)
-
Ottawa
- (when)
-
2019
- DOI
-
doi:10.34989/swp-2019-21
- Handle
- Last update
-
10.03.2025, 11:43 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Kryvtsov, Oleksiy
- Petersen, Luba
- Bank of Canada
Time of origin
- 2019
Other Objects (12)
What to target? Insights from a lab experiment
Lessons from international central counterparties: Benchmarking and analysis
A Bitcoin standard: Lessons from the gold standard
An overview of carbon markets and emissions trading: Lessons for Canada
Central bank communication or the media's interpretation: What moves markets?
Labor demand response to labor supply incentives: Lessons from the German Mini-Job Reform
Do we need the IMF to resolve a crisis? Lessons from past episodes of debt restructuring
Reforming the IMF: Lessons from modern central banking
Lessons from the financial crisis: Bank performance and regulatory reform
International banking and cross-border effects of regulation: Lessons from Canada
Monetary policy and cross-border interbank market fragmentation: Lessons from the crisis
Starting from a blank page? Semantic similarity in central bank communication and market volatility
What to target? Insights from a lab experiment
Lessons from international central counterparties: Benchmarking and analysis
A Bitcoin standard: Lessons from the gold standard
An overview of carbon markets and emissions trading: Lessons for Canada
Central bank communication or the media's interpretation: What moves markets?
Labor demand response to labor supply incentives: Lessons from the German Mini-Job Reform
Do we need the IMF to resolve a crisis? Lessons from past episodes of debt restructuring
Reforming the IMF: Lessons from modern central banking
Lessons from the financial crisis: Bank performance and regulatory reform
International banking and cross-border effects of regulation: Lessons from Canada
Monetary policy and cross-border interbank market fragmentation: Lessons from the crisis
Starting from a blank page? Semantic similarity in central bank communication and market volatility
What to target? Insights from a lab experiment
Lessons from international central counterparties: Benchmarking and analysis
A Bitcoin standard: Lessons from the gold standard
An overview of carbon markets and emissions trading: Lessons for Canada
Central bank communication or the media's interpretation: What moves markets?
Labor demand response to labor supply incentives: Lessons from the German Mini-Job Reform
Do we need the IMF to resolve a crisis? Lessons from past episodes of debt restructuring
Reforming the IMF: Lessons from modern central banking
Lessons from the financial crisis: Bank performance and regulatory reform
International banking and cross-border effects of regulation: Lessons from Canada
Monetary policy and cross-border interbank market fragmentation: Lessons from the crisis