Central bank communication through interest rate projections

Brubakk, Leif; Ellen, Saskia ter; Hong, Xu

doi:10.1016/j.jbankfin.2021.106044

Cited by 4 publications

(7 citation statements)

References 19 publications

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“…For example, the impact of PBOC communication on the stock market is only found to be largely time varying Guo et al, 2021;Blinder et al, 2008), which do not work out the N in the N-day trading. And "N" is not able to be calculated on the excuse of long or near-term factors (Jung and Kuehl, 2021;Brubakk et al, 2021).…”

Section: Discussionmentioning

confidence: 99%

“…, 2008), which do not work out the N in the N-day trading. And “N” is not able to be calculated on the excuse of long or near-term factors (Jung and Kuehl, 2021; Brubakk et al. , 2021).…”

Section: Discussionmentioning

confidence: 99%

“…It can be noted that sub-financial topics of CBC have been singled out to demonstrate the impact of CBC on stock market. For example, the exchange rate changes (Conrad and Lamla, 2010;Mirkov et al, 2019), inflation (Nicol o, 2020) and interest rate (Brubakk et al, 2021) and bonds (Zhang and Shen, 2021). One of the important features of these research studies lies in that semantics of CBC are given special attention.…”

Section: Literature Review 21 Cbc and Stock Marketmentioning

confidence: 99%

“…For example, the exchange rate changes (Conrad and Lamla, 2010; Mirkov et al. , 2019), inflation (Nicolò, 2020) and interest rate (Brubakk et al. , 2021) and bonds (Zhang and Shen, 2021).…”

Section: Literature Reviewmentioning

confidence: 99%

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Does the Centrual Economic Work Conference (CEWC) affect the stock market?

Xian

Zhao

Wang³

et al. 2023

JCMS

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PurposeThis paper focuses on the orientation of the economy expressed in the communication of the Central Economic Work Conference (CEWC) of China and its relation with the stock market. This study seeks to explore which orientation of the economy may have a stronger impact on the rise of the stock market. It proposes words connoting orientation of the economy (WOE) that is closely related to the stock market, and different WOE has different impacts on the stock market in terms of intensity. The study aims to provide investors with better investment strategies by identifying the stronger developmental WOE.Design/methodology/approachThe paper opted for an exploratory study using the textual analysis approach, based on a corpus of 28 CEWC communications spanning from 1994 to 2021. The raw corpus amounted to 50,754 words in total that are treated with noise reduction method and record an effective corpus of 39,591.FindingsThe paper provides empirical insights into the close relationship of the WOE of the CEWC to the stock market, and different WOE has different impacts on the stock market in terms of intensity. It suggests that WOE connoting development may forecast a rising stock market if it is nearly 40% higher than the other two WOEs by impact index.Research limitations/implicationsAs WOE is only proven in the CEWC, this paper has its limitations in the scope of samples. It is necessary to apply WOE to more Central Bank communication (CBC) and countries. It is desirable to apply the Gunning–Fog index.Practical implicationsThe paper includes implications for investors to read out the orientation of the economy and the degree of different WOEs. Investors are keener to know “what” degree of the CEWC leads to the rise/fall of the stock market. The impact index can be an indicator of a tendency of the stock market, which upgrades the rationality of investment decisions.Social implicationsThis paper fulfills words connoting the orientation of economy as an identified linguistic feature, which the impact of CEWC on stockmarket can be measured.Originality/valuePrevious academic research studies mostly focus on the impact on stock market from the language features of CBC, rather than that from the more influential body, CEWC communication. This study seeks to provide the relationship of CEWC communication and the time length of the impact on the stock prices.

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Section: Discussionmentioning

confidence: 99%

Section: Discussionmentioning

confidence: 99%

Section: Literature Review 21 Cbc and Stock Marketmentioning

confidence: 99%

Section: Literature Reviewmentioning

confidence: 99%

See 2 more Smart Citations

Does the Centrual Economic Work Conference (CEWC) affect the stock market?

Xian

Zhao

Wang³

et al. 2023

JCMS

View full text Add to dashboard Cite

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“…The impact of central banks on financial market is materialized as a result of their decisions to move interest rates or to change the value of other important macroeconomic variables, such as money supply or official reserves etc. (see Hanousek et al ., 2009; Hayo and Neuenkirch, 2012; Sun, 2020; Brubakk et al ., 2021; Breitenlechner et al ., 2021). The channels of transmission include covered or uncovered interest rates parity relationships in the foreign exchange market, discounting of future cash flows mechanism in the bonds market or the changing dynamics of capital flows in the stock market, which may be triggered by the central banks' decisions (see Binder, 2017; Weber, 2019; Lamla and Vinogradov, 2019; Hüning, 2020; Bennani, 2020; Beutel et al ., 2021, among others).…”

Section: Introductionmentioning

confidence: 99%

Central bank's communication and markets' reactions: Polish evidence

Brzeszczyński

Gajdka

Schabek

et al. 2021

IJOEM

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PurposeThis study contributes to the pool of knowledge about the impact of monetary policy communication of central banks on financial instruments' prices and assets' value in emerging markets.Design/methodology/approachEmpirical analysis is executed using the National Bank of Poland (NBP) announcements about its monetary policy covering the data from the broad financial market in its three main segments: stock market, foreign exchange market and bonds market. The reactions are measured relative to the changes in the NBP announcements and also with respect to investors' expectations. Autoregressive conditional heteroscedasticity (ARCH) models with dummy variables are used as the main methodological tool.FindingsBonds market and foreign exchange market are the most sensitive market segments, while interest rate and money supply are the most influential types of announcements. The changes of the revealed new macroeconomic figures had more impact on assets' prices movements than the deviations from their expectations. Moreover, greater diversity of the Monetary Policy Council (MPC) members' opinions on the voted motions, captured in the MPC voting reports, is associated with more cases of statistically significant NBP communication events.Practical implicationsThe findings have direct relevance for fund managers, portfolio analysts, investors and also for financial market regulators.Originality/valueThe results provide novel evidence about how the emerging financial market responds to monetary policy announcements. They help understand the nature of the impact of public information on financial assets' valuation and on movements of their prices, analysed comprehensively in three market segments, in the emerging market environment.

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Central bank forecasting: A survey

Binder

Sekkel

2023

Journal of Economic Surveys

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Central banks' forecasts are important monetary policy inputs and tools for central bank communication. We survey the literature on forecasting at the Federal Reserve, European Central Bank, Bank of England, and Bank of Canada, focusing especially on recent developments. After describing these central banks' forecasting frameworks, we discuss the literature on central bank forecast evaluation and new tests of unbiasedness and efficiency. We also discuss evidence of central banks' informational advantage over private sector forecasters, which appears to have weakened over time, and how central bank forecasts may affect private sector expectations even in the absence of an informational advantage. We discuss how the Great Recession led central banks to evaluate their forecasting frameworks, how the Covid‐19 pandemic has further challenged central bank forecasting, and directions for future research.

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Central bank communication through interest rate projections

Cited by 4 publications

References 19 publications

Does the Centrual Economic Work Conference (CEWC) affect the stock market?

Does the Centrual Economic Work Conference (CEWC) affect the stock market?

Central bank's communication and markets' reactions: Polish evidence

Central bank forecasting: A survey

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