The Central Bank Communication Impact On Inflation Expectations

Maintain the stability of the market price has always been a prime target for each countrycentral bank regulation economy, how to effectively manage inflation has become a hotacademic discussion. Since Lucas will be introduced to the rational expectations factors in themanagement of inflation, the inflation expectations of growing importance, how to guide theformation of inflation expectations reasonably has become a key link in the study of inflationmanagement. Nowadays, with the rapid development of rational expectations hypothesis,most central Banks gradually realized effectively lead inflation expectations would help thepublic decision-making is consistent with the central Banks aim, enabling the public to bettercarry out the intentions of the central bank, in order to enhance the effectiveness of the centralbank’s monetary policy. Therefore, in order to manage public expectations of inflation, centralBanks began to gradually pay attention to the central bank’s information communicationsystem.The formation of the public interest rates and inflation expectations will affect the marketprice of capital, such as the change of variables, and the change of these metrics will furtheraffect the economic variables such as inflation and social total output changes. Therefore, thecentral bank communication effect the key depends on the formation of the economic subjectis expected. But the formation of the public inflation expectations in public optimism andpessimism about the economy situation is likely to have significant differences, which maylead to the different economic situation, the central bank form the effect of differentcommunication channel public inflation expectations. When the public expectations and thecentral bank’s policy goals at the same time, the central bank communication easy to guide theeconomic main body to form a reasonable expectations, and strengthen the effect of monetarypolicy; But conversely. So the different economic situation, the central bank communicationimpact on inflation expectations, better able to encourage the improvement of the system ofcentral bank communication, strengthen the interaction with the public, enhance the centralbank monetary policy into the open and transparent, to develop a more complete, moreeffective strategy for information disclosure, to stabilize inflation expectations of the public,promote the implementation of the policy effect.Based on the central bank information communication and theoretical analysis of theconnotation of inflation expectations, constructed a theoretical model to describe differenteconomic situation, the central bank information communication on the nonlinear influence ofinflation expectations, and reference to domestic and international relevant research results,build the central bank information disclosure index and inflation expectations, the use ofmarkov vector autoregressive model to study the different economic cycles of the central bank information communication to our country public inflation expectations of asymmetric effects.The empirical results show that during the boom years, the central bank informationcommunication and strong the effect of the guide inflation expectations; During the recession,the central bank information communication guide effect is weak in inflationary expectations.