Strategic Central Bank Communication: Discourse and Game -Theoretic Analyses of the Bank of Japan's Monthly Report

37 Pages Posted: 16 Mar 2016

See all articles by Kohei Kawamura

Kohei Kawamura

School of Economics, University of Edinburgh

Yohei Kobashi

Waseda University

Masato Shizume

Faculty of Political Science and Economics; Bank of Japan - Institute for Monetary and Economic Studies

Kozo Ueda

Waseda University; Australian National University (ANU) - Centre for Applied Macroeconomic Analysis (CAMA)

Date Written: March 14, 2016

Abstract

We conduct a discourse analysis of the Bank of Japan’s Monthly Report and examine its characteristics in relation to business cycles. We find that the difference between the number of positive and negative expressions in the reports leads the leading index of the economy by approximately three months, which suggests that the central bank’s reports have some superior information about the state of the economy. Moreover, ambiguous expressions tend to appear more frequently with negative expressions. Using a simple persuasion game, we argue that the use of ambiguity in communication by the central bank can be seen as strategic information revelation when the central bank has an incentive to bias the reports (and hence beliefs in the market) upwards.

Keywords: Monetary policy, transparency, natural language processing, modality, latent Dirichlet allocation (LDA), verifiable disclosure model

JEL Classification: D78, D82, E58, E61

Suggested Citation

Kawamura, Kohei and Kobashi, Yohei and Shizume, Masato and Ueda, Kozo, Strategic Central Bank Communication: Discourse and Game -Theoretic Analyses of the Bank of Japan's Monthly Report (March 14, 2016). CAMA Working Paper No. 11/2016 . Available at SSRN: https://ssrn.com/abstract=2747761 or http://dx.doi.org/10.2139/ssrn.2747761

Kohei Kawamura

School of Economics, University of Edinburgh ( email )

50 George Square
Edinburgh, EH8 9JY, Scotland
United Kingdom

Yohei Kobashi

Waseda University ( email )

1-104 Totsukamachi, Shinjuku-ku
tokyo, 169-8050
Japan

Masato Shizume

Faculty of Political Science and Economics ( email )

1-6-1 Nishi-Waseda
Shinjuku-ku, Tokyo 169-8050, Tokyo 169-8050
Japan

Bank of Japan - Institute for Monetary and Economic Studies ( email )

2-1-1, Hongoku-cho
Nihonbashi
Chuo-ku, Tokyo, 103
Japan

Kozo Ueda (Contact Author)

Waseda University ( email )

1-104 Totsukamachi, Shinjuku-ku
tokyo, 169-8050
Japan

Australian National University (ANU) - Centre for Applied Macroeconomic Analysis (CAMA) ( email )

ANU College of Business and Economics
Canberra, Australian Capital Territory 0200
Australia

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