Central Bank Communications: A Case Study

39 Pages Posted: 3 Oct 2016

See all articles by J. Scott Davis

J. Scott Davis

Federal Reserve Banks - Federal Reserve Bank of Dallas

Mark Wynne

Federal Reserve Bank of Dallas

Date Written: 2016-09-01

Abstract

Over the past twenty five years, central bank communications have undergone a major revolution. Central banks that previously shrouded themselves in mystery now embrace social media to get their message out to the widest audience. The Federal Reserve System has not always been at the forefront of these changes, but the volume of information about monetary policy that the Federal Open Market Committee (FOMC) now releases dwarfs what it was releasing a quarter century ago. In this paper we focus on just one channel of FOMC communications, the post-meeting statement. We document how it has evolved over time, and in particular the extent to which it has become more detailed, but also more difficult to understand. We then use a VAR with daily financial market data to estimate a daily time series of U.S. monetary policy shocks. We show how these shocks on Fed statement release days have gotten larger as the statement has gotten longer and more detailed, and we show that the length and complexity of the statement has a direct effect on the size of the monetary policy shock following a Fed decision.

JEL Classification: E58, E65

Suggested Citation

Davis, J. Scott and Wynne, Mark A., Central Bank Communications: A Case Study (2016-09-01). Globalization and Monetary Policy Institute Working Paper No. 283. Available at SSRN: https://ssrn.com/abstract=2846344 or http://dx.doi.org/10.24149/gwp283

J. Scott Davis (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of Dallas ( email )

2200 North Pearl Street
PO Box 655906
Dallas, TX 75265-5906
United States

Mark A. Wynne

Federal Reserve Bank of Dallas ( email )

PO Box 655906
Dallas, TX 75265-5906
United States
214-922-5159 (Phone)
214-922-5194 (Fax)

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