The Relationship Between Central Bank Communication?Public Expectations And Real Inflation

Central bank communication is the central bank using oral or written comnunications,to give its information about monetary policy,the economic outlook and future monetary policy intention to market participants and the financial market,thus reducing the information asymmetry between the public and the central bank,then guiding the social public to form a reasonable monetary policy which is expected by the central bank,finally to reach the central bank monetary policy goal and improve the effect of monetary policy.With the development of the monetary policy theory and practice experience,eentral bank communication gradually became a new vital important monetary policy tool.Based on the fully literature review,this paper studies further about the theoretical analysis and empirical test of the relationship among central bank communication?public expectations and real inflation.Firstly,the data sample period of this paper is from January 1,2006 to December 31,2017,and the communication index is built by written communication of the central bank.Then,by using the SVAR model and impulse response function,this paper starts the empirical research.The analysis results show that central bank communication has a positive impact on public expectations and real inflation,but the effect is not obvious.That may due to the time lag and unclear information of central bank communication.On top of that,by variance decomposition,it shows the change of the communication index has a greater contribution to public expectations and real inflation than actual intervention of the central bank.That means the central bank communication is more effective on guiding and managing public expectations than traditional monetary policy tools.In order to make central bank communication play a more important role in monetary policy operation,central bank should improve the consistency of central bank communication,also should strengthen the behavior of central bank communication widely and timely.