Research On The Impact Of Central Bank Communication On Inflation Expectations

With monetary policy theory and practice of development, the communication policy of the central banks attracts a lot of attention from financial markets. In recent years, in order to stabilize the public and the market expectations, central banks can start to gradually improve, an effective policy instrument - the central bank's communication policy and enhance the transparency of monetary policy.People's Bank of China has taken various measures to improve communication policy and improved the effectiveness of monetary policy. However, the effectiveness of China's monetary policy still needs to improve. In the international financial crisis, how to stabilize inflation expectations? How to deal with deflationary pressure in the short term and how to prevent inflation in the long term? Therefore, our study are expected to contribute to our country's central bank to further improve the communication policy to formulate more effective, more forward-looking information disclosure strategy, the stability of inflation expectations.Based on the theoretical analysis, this paper analyses the informational content of the quarterly introductory statements of the People's Bank of China with regard to inflation expectations from 2001 to 2008 and applied the vector error correction model to empirically test the influence of the People's Bank of China's communication on expectations formation .As the results indicate, the wording indicator measuring the informational content of People's Bank of China's rhetoric contributes to the explanation of inflation expectations formation.