Can Central Bank Communication Help to Stabilise Inflation Expectations?

33 Pages Posted: 11 May 2021 Last revised: 18 Nov 2021

See all articles by Alexander Jung

Alexander Jung

European Central Bank

Patrick Kühl

Association for Financial Markets in Europe

Date Written: May, 2021

Abstract

This paper examines whether central bank communication stabilises euro area inflation expectations through the information and news channel. A novelty of the study is its use of data from Google Analytics on ECB website traffic as proxy for visitors’ attention to its communication. We conduct several econometric tests with daily data to measure the impact of ECB communication on the information demand of the public and ultimately on inflation expectations. Overall, this study shows that website attention, as captured by search volumes of visitors, influences euro area inflation expectations. We find that increased website attention contributes to narrowing the gap between market-based forecasts and (the mean of) longer-term professional inflation expectations. Our findings add to the theoretical evidence on the existence of an information and news channel.

JEL Classification: C20, D80, E52, E58, G14

Suggested Citation

Jung, Alexander and Kühl, Patrick, Can Central Bank Communication Help to Stabilise Inflation Expectations? (May, 2021). ECB Working Paper No. 2021/2547, Available at SSRN: https://ssrn.com/abstract=3843005 or http://dx.doi.org/10.2139/ssrn.3843005

Alexander Jung (Contact Author)

European Central Bank ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany
00496913447674 (Phone)
00496913447604 (Fax)

Patrick Kühl

Association for Financial Markets in Europe ( email )

London
United Kingdom

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