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Economic Survey  2019, Vol. 36 Issue (1): 0126    DOI:
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Central Bank Communication, Policy Uncertainty and Inflation Expectations
WANG Shao-lin, DING Jie
School of Finance, Guangdong University of Finance and Economics, Guangzhou 510320, China
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Abstract 

Future policy uncertainty is an important source of public inflation expectations. Based on this, this article establishes a VAR model with time-varying parameters (TVP-SV-VAR),then analyzes how policy uncertainty is applied to public inflation expectations, and defines the explanatory power of the influence path of central bank communication on public inflation expectations through reducing policy uncertainty. The results show that: first, the rise in policy uncertainty will raise public inflation expectations, which is mainly due to the loose-type policy preferences of policymakers under the high policy uncertainty; second, a one-point increase in central bank communication will reduce policy uncertainty by a maximum of 10 points, while the drop of 1 point in policy uncertainty will reduce public inflation expectations by a maximum of 0.003 points; third, a one-point increase in central bank communication will reduce public inflation expectations by a maximum of 0.1 points. The explanatory power of the assumption that central bank communication realizes the regulation of public inflation expectations by reducing policy uncertainty is obviously insufficient. It would be a beneficial attempt to deepen the central bank communication and improve the transparency of other policies in the future in hope of reducing policy uncertainty and stabilizing public inflation expectations.

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Articles by authors
WANG Shao-lin
DING Jie
Key wordsCentral Bank Communication   Policy Uncertainty   Inflation Expectations     
Received: 2018-06-11
ZTFLH:  F832  
Cite this article:   
WANG Shao-lin,DING Jie. Central Bank Communication, Policy Uncertainty and Inflation Expectations. Economic Survey, 2019, 36(1): 0126.
URL:  
http://www.jjjw.org.cn/CN/Y2019/V36/I1/0126
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