New evidence from the monetary policy communication and inflation expectations nexus in Africa
Motivated by the dearth of evidence, we examine the impact of monetary policy communication on inflation expectations in Africa. Employing text-mining techniques to analyse the monetary policy statements of six African central banks, we compute a novel index of monetary policy communication (MPCI) u...
| Main Authors: | , , |
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| Format: | Article |
| Language: | English |
| Published: |
Elsevier
2024-03-01
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| Series: | Scientific African |
| Subjects: | |
| Online Access: | http://www.sciencedirect.com/science/article/pii/S2468227623004477 |
| _version_ | 1797277263254781952 |
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| author | Ada Tony Odu Umaru Aminu Nuhu Ado |
| author_facet | Ada Tony Odu Umaru Aminu Nuhu Ado |
| author_sort | Ada Tony Odu |
| collection | DOAJ |
| description | Motivated by the dearth of evidence, we examine the impact of monetary policy communication on inflation expectations in Africa. Employing text-mining techniques to analyse the monetary policy statements of six African central banks, we compute a novel index of monetary policy communication (MPCI) using the extracted word counts, readability, sentiment and tone indicators. We provide new evidence of a positive and statistically significant impact of sentiments, tone and the MPCI on inflation expectations in Africa. Our results also reveal a rising influence of sentiments in anchoring expectations during the COVID-19 pandemic era. Our results are robust to alternative measures of inflation expectation and to global economic uncertainty. We recommend concise and lucid policy statements alongside statements with tone and policy decision consistency for anchoring inflation expectations. Furthermore, investors should carefully analyse and respond to signals from central bank communication, incorporating these insights into their investment strategies and risk management practices. |
| first_indexed | 2024-03-07T15:46:08Z |
| format | Article |
| id | doaj.art-0f42b187cb26447ba71d3d01e0f60b23 |
| institution | Directory Open Access Journal |
| issn | 2468-2276 |
| language | English |
| last_indexed | 2024-03-07T15:46:08Z |
| publishDate | 2024-03-01 |
| publisher | Elsevier |
| record_format | Article |
| series | Scientific African |
| spelling | doaj.art-0f42b187cb26447ba71d3d01e0f60b232024-03-05T04:30:06ZengElsevierScientific African2468-22762024-03-0123e01993New evidence from the monetary policy communication and inflation expectations nexus in AfricaAda Tony Odu0Umaru Aminu1Nuhu Ado2Corresponding author.; Research Department, Central Bank of Nigeria, NigeriaResearch Department, Central Bank of Nigeria, NigeriaResearch Department, Central Bank of Nigeria, NigeriaMotivated by the dearth of evidence, we examine the impact of monetary policy communication on inflation expectations in Africa. Employing text-mining techniques to analyse the monetary policy statements of six African central banks, we compute a novel index of monetary policy communication (MPCI) using the extracted word counts, readability, sentiment and tone indicators. We provide new evidence of a positive and statistically significant impact of sentiments, tone and the MPCI on inflation expectations in Africa. Our results also reveal a rising influence of sentiments in anchoring expectations during the COVID-19 pandemic era. Our results are robust to alternative measures of inflation expectation and to global economic uncertainty. We recommend concise and lucid policy statements alongside statements with tone and policy decision consistency for anchoring inflation expectations. Furthermore, investors should carefully analyse and respond to signals from central bank communication, incorporating these insights into their investment strategies and risk management practices.http://www.sciencedirect.com/science/article/pii/S2468227623004477C33E31E58 |
| spellingShingle | Ada Tony Odu Umaru Aminu Nuhu Ado New evidence from the monetary policy communication and inflation expectations nexus in Africa Scientific African C33 E31 E58 |
| title | New evidence from the monetary policy communication and inflation expectations nexus in Africa |
| title_full | New evidence from the monetary policy communication and inflation expectations nexus in Africa |
| title_fullStr | New evidence from the monetary policy communication and inflation expectations nexus in Africa |
| title_full_unstemmed | New evidence from the monetary policy communication and inflation expectations nexus in Africa |
| title_short | New evidence from the monetary policy communication and inflation expectations nexus in Africa |
| title_sort | new evidence from the monetary policy communication and inflation expectations nexus in africa |
| topic | C33 E31 E58 |
| url | http://www.sciencedirect.com/science/article/pii/S2468227623004477 |
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