Central Bank Communications and the General Public

Abstract

Despite the recent revolution in central bank communication, it is unclear the general public have benefitted from these enhanced central bank communications. We first analyze the growth of communication and some reasons that the public may have missed the revolution. We then discuss the desirability of greater communication with the public. The case for feasibility of such communication examines observational and experimental evidence following the recently adopted use of a layered communication at the Bank of England. We find that, while more research is needed, there are compelling reasons for central banks to continue trying to target communication at the public.

Monetary Policy Communications and their Effects on Household Inflation Expectations

“…Additional results have also been documented for households: Armantier et al (2016) study the response of households' inflation expectations to professionals' inflation forecasts, Roth and Wohlfart (2018) consider how households respond to professionals' opinions about the likelihood of a recession, while Armona et al (2018) assess how households respond to news about housing prices. In related work, Haldane and McMahon (2018) use randomized treatments to explore how/whether changing the presentation of the Bank of England's statements alters the public's understanding of their message. Finally, Binder and Rodrigue (2018) document that households revise their long-run inflation forecasts when presented with information about recent inflation or the central bank's inflation target.…”

Does the Media Help the General Public in Understanding Inflation?

“…For instance, in late‐2017, the Bank of England started augmenting the information in its Inflation Report with content aimed explicitly at a less‐specialist audience. A first analysis of this new approach, based on a controlled experiment, suggest that more straightforward communication indeed improves the likelihood that people's beliefs align with the forecast of the central bank (Haldane and McMahon, ). Building on these initial findings, it would be interesting to explore further to what extent direct engagement with the public might be a complement or substitute for relying on the more traditional media channels.…”

“…Our results suggest then that reaching out to the general public may not be a straightforward exercise for central banks. The recent experience of some central banks in engaging directly with the public will be interesting to monitor, especially since first evidence on the effectiveness of these efforts is positive (Haldane and McMahon, ).…”

The long-run information effect of central bank communication

“…Shiller (2017) introduced the notion of Narrative Economics, which emphasizes the role of narratives in spreading beliefs. In monetary policy, central banks have an important role in shaping public narrative (Haldane and McMahon 2018), and our work suggests this includes narratives about economic uncertainty.…”