RIEB Discussion Paper Series No.2022-16

Title

Central Bank Economic Confidence and the Macroeconomy

Abstract

Challenges for empirical research on the role of central bank communication in the macroeconomy include quantitatively characterizing the content of information dissemination by central banks in a way that is comparable and easily interpretable over time, and evaluating the causal relationship between information dissemination and the macroeconomy. This paper quantifies textual data on central bank offcials' statements as characterized by economic cofidence, and uses econometric methodology to examine the dynamic causal effects of measured central bank economic confidence on the macroeconomy. We provide quantitative evidence that central bank information dissemination has two distinct qualities, its economic outlook and sentiment, which have dfferent effects on the macroeconomy. While authorities can be expected to enhance policy effectiveness by communicating their economic outlook and policy belief to the public, the quantitative impact of changed belief on the macroeconomy is not as large as that of an updated economic outlook.

Keywords

Central bank communication; Economic confidence; Macroeconomy; Sentiment analysis; Vector autoregressive model

JEL Classification

E52, E58

Inquiries

Masahiko SHIBAMOTO
Research Institute for Economics and Business Administration(RIEB)
Center for Computational Social Science (CCSS)
Kobe University
Rokkodai-cho, Nada-ku, Kobe
657-8501 Japan
Phone: +81-78-803-7036
FAX: +81-78-803-7059

Kazuhiro SEKI
Faculty of Intelligence and Informatics, Konan University

Takashi KAMIHIGASHI
Research Institute for Economics and Business Administration(RIEB)
Center for Computational Social Science (CCSS)
Kobe University