Inflation-targeting central banks have a respectable track record at explaining their policy actions and corresponding inflation outturns. Using a simple forward-looking policy rule and an assessment of inflation reports, we provide a new methodology for the empirical evaluation of consistency in central bank communication. We find that the three communication tools—inflation targets, inflation forecasts, and verbal assessments of inflation factors contained in quarterly inflation reports—provided a consistent message in five out of six observations in our 2000–05 sample of Chile, the Czech Republic, Hungary, Poland, Thailand, and Sweden.
Keywords: Emerging markets, forecasting, inflation targeting, monetary policy, transparency
Issued: December 2007
Published as: Šmídková K. and A. Bulíř (2007): What do we want central bank communication to be: “clearly open” or “crystal clear”?, Czech Journal of Economics and Finance, 57(11-12), pp. 540-557.
Download: CNB WP 14/2007 (pdf, 549 kB)