Does Communication Influence Executives’ Opinion of Central Bank Policy?

SNB Working Papers, 17/2020

67 Pages Posted: 14 Nov 2020

See all articles by In Do Hwang

In Do Hwang

Department of Economics, University of Illinois at Urbana-Champaign; The Bank of Korea

Thomas Lustenberger

Swiss National Bank; University of Basel - Faculty of Business and Economics

Enzo Rossi

Swiss National Bank

Date Written: July 29, 2020

Abstract

We analyze the economic impact of central banks sensed by business executives in a sample of 61 countries from 1998 to 2016. Based on a survey conducted by the Institute for Management Development (IMD), we find compelling evidence that intensive central bank communication worsens the perceived impact. During the global financial crisis (GFC), this effect became even stronger. In contrast, economic growth and a positive output gap improve the opinion executives have of their central bank’s impact on the economy. Moreover, although less robustly, higher unemployment, and higher short-term interest rates worsen executives’ opinion, while market uncertainty improves it. The level of inflation and an inflation targeting regime, central bank independence and transparency, financial crises, the zero lower bound constraint, forward guidance, the performance of the stock exchange, and the volatility of the exchange rate seem to be unimportant in this regard.

Keywords: central bank communication, economic impact, perceived competence and trust in central banks, panel data, executive survey

JEL Classification: E58, E52, D83, D80

Suggested Citation

Hwang, In Do and Hwang, In Do and Lustenberger, Thomas and Lustenberger, Thomas and Rossi, Enzo, Does Communication Influence Executives’ Opinion of Central Bank Policy? (July 29, 2020). SNB Working Papers, 17/2020, Available at SSRN: https://ssrn.com/abstract=3699905 or http://dx.doi.org/10.2139/ssrn.3699905

In Do Hwang (Contact Author)

The Bank of Korea ( email )

Department of Economics, University of Illinois at Urbana-Champaign ( email )

214 David Kinley Hall, 1407 W. Gregory
Urbana, IL IL 61801
United States
(217) 333-0120 (Phone)

Thomas Lustenberger

University of Basel - Faculty of Business and Economics ( email )

Petersplatz 1
Basel, 4001
Switzerland

Swiss National Bank

Research
Fraumuensterstr. 8
Zuerich, 8022
Switzerland

Enzo Rossi

Swiss National Bank ( email )

Research
Fraumuensterstr. 8
Zuerich, 8022
Switzerland

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