•Improved identification of the effect of FOMC announcements on consumers through surveys two days before and after FOMC meetings.•FOMC announcements have no measurable direct effect on perceptions ...and expectations of inflation and interest rates.•FOMC announcements increase the probability of receiving monetary policy news.•Announcements without press conferences do not affect the probability of receiving monetary policy news.•Exposure to news improves the precision of perceptions and expectations, increases confidence and lowers dispersion of beliefs.
Little is known on how and whether central bank announcements affect consumers’ beliefs about policy-relevant economic figures. This paper focuses on consumers’ perceptions and expectations of inflation and interest rates and confidence therein. Based on a sound identification (running surveys shortly before and after communication events), and relying on above 15,000 observations, spanning over 12 FOMC press conferences between December 2015 and June 2018, we document the impact of the central bank communication on the general public. While announcement events have no measurable direct effect on average beliefs, they make people more likely to receive news about the central bank’s policy. In general, informed consumers tend to have lower perceptions and expectations, higher confidence and, at least for perceived inflation, smaller errors.
Abstract After the financial crisis of 2008, central banks around the world have increased their communication efforts to reach consumers, with the aim of both guiding and anchoring their inflation ...expectations. For the expectations channel of monetary policy to work as intended, central banks need a thorough understanding of the formation process of expectations by the general public and of the relationship between expectations and economic choices. This warrants reliable and detailed data on consumers' expectations of macroeconomic variables such as inflation or interest rates. We, thus, survey the available survey data and issues regarding the measurement of macroeconomic expectations. Furthermore, we discuss the research frontier on important aspects of the expectations channel: We evaluate the evidence on whether expectations are formed consistently with standard macroeconomic relationships, discuss the insights with respect to the anchoring of inflation expectations, explore the role of narratives and preferences and lastly, we survey the research on causal effects of central bank communication on expectations and economic choices.
In this paper we analyze whether central bank communication can facilitate the understanding of key economic concepts. Using survey data for consumers and professionals, we calculate how many of them ...have expectations consistent with the Fisher Equation, the Taylor rule and the Phillips curve and test, by accounting for three different communication channels, whether central banks can influence those. A substantial share of participants has expectations consistent with the Fisher equation, followed by the Taylor rule and the Phillips curve. We show that having theory-consistent expectations is beneficial, as it improves the forecast accuracy. Furthermore, consistency is time varying. Exploring this time variation, we provide evidence that central bank communication as well as news on monetary policy can facilitate the understanding of those concepts and thereby improve the efficacy of monetary policy.
This paper investigates the effects of media coverage about consumer price inflation on inflation forecast disagreement of German households and professional forecasters. We adopt a Bayesian learning ...model in which media coverage of inflation affects forecast disagreement by influencing information sets as well as predictor choice. Our empirical results show that disagreement of households depends on the heterogeneity of story content and on the reporting intensity, especially of news on rising inflation. Disagreement of professional forecasters does not depend on media coverage. With respect to the influence of macroeconomic variables, we provide evidence that disagreement of professional forecasters primarily depends on the inflation rate and on inflation volatility. The response of households to inflation is much less pronounced.
•In the presence of informational frictions, news influence peoples’ expectations.•Employ a detailed daily media dataset.•Distinguish between amount of news and content of news.•Find economically ...significant effect of media reporting on inflation expectations.•More news improve forecast accuracy only if they are not framed in a negative way.
The full-information rational expectations model is clearly rejected by the data. The expectation formation process has therefore important implications for macroeconomic outcomes. We examine how consumers react to information provided by the media, by taking into account that this information is imperfect. We show that information rigidities play a role empirically. Intensive news reporting improves the accuracy of consumers’ inflation expectations, because they receive more information. However, this effect depends on the tone of the news. If news are badly toned, the effect reverts.
This paper examines how robust economic, political, and demographic variables are related to water and air pollution. Employing Bayesian Averaging of Classical Estimates (BACE) for a cross section of ...47 countries, 34 variables and 3 proxies for air and water pollution over a period from 1980 to 2000 we confirm the environmental Kuznets curve hypothesis and highlight the relevance of variables that are not directly related to production.
This paper analyzes whether the educational and professional background of a head of government matters for the implementation of market-liberalizing reforms. Employing panel data over the period ...1970–2002, we present empirical evidence based on a novel data set covering profession and education of more than 500 political leaders from 72 countries. Our results show that reforms are more likely during the tenure of former entrepreneurs. Entrepreneurs belonging to a left-wing party are more successful in inducing reforms than a member of a right-wing party with the same previous profession. Former professional scientists also promote reforms, the more so, the longer they stay in office. The impact of politicians' education is not robust and depends on the method of estimation.
Journal of Comparative Economics
37 (1) (2009) 169–193.
Extreme Bounds of Democracy Gassebner, Martin; Lamla, Michael J.; Vreeland, James Raymond
The Journal of conflict resolution,
04/2013, Letnik:
57, Številka:
2
Journal Article
Recenzirano
Odprti dostop
What determines the emergence and survival of democracy? The authors apply extreme bounds analysis to test the robustness of fifty-nine factors proposed in the literature, evaluating over three ...million regressions with data from 165 countries from 1976 to 2002. The most robust determinants of the transition to democracy are gross domestic product (GDP) growth (a negative effect), past transitions (a positive effect), and Organisation for Economic Co-operation and Development membership (a positive effect). There is some evidence that fuel exporters and Muslim countries are less likely to see democracy emerge, although the latter finding is driven entirely by oil-producing Muslim countries. Regarding the survival of democracy, the most robust determinants are GDP per capita (a positive effect) and past transitions (a negative effect). There is some evidence that having a former military leader as the chief executive has a negative effect, while having other democracies as neighbors has a reinforcing effect.
We investigate the impact of the European Central Bank's monetary policy communication during the press conference held after the monthly Governing Council meeting on the EUR-USD exchange rate in ...high frequency. Based on the method of Content Analysis, we construct communication indicators for the introductory statement and find that communication with respect to future price developments is most relevant. In response to statements about increasing risks to price stability the EUR appreciates on impact. To the contrary, communication about economic activity and monetary aggregates does not generate significant exchange rate reactions.
Risk, financial stability and FDI Kellard, Neil M.; Kontonikas, Alexandros; Lamla, Michael J. ...
Journal of international money and finance,
February 2022, 2022-02-00, Letnik:
120
Journal Article
Recenzirano
Odprti dostop
•This paper examines how risk in host and origin countries affects Eurozone FDI.•Country of origin bank risk impacts on FDI; country of domicile bank risk does not.•The effects of sovereign risk are ...most pronounced in FDI supplying nations.•Policymakers need to be aware of the financing environment in both host and origin.
All Foreign Direct Investment (FDI) involves risk. Augmenting the international finance literature, we assess the effects of financial system risk on FDI trends through considering both origin and host country effects. Motivated by the sovereign debt crisis and based on a dataset including bilateral FDI holdings, this paper investigates the implications of sovereign and bank-related risk on FDI in the Eurozone. Strikingly, we find that in terms of banking risk, it is only that encountered in the country of origin that has an impact on FDI choices. However, we find that sovereign risk, in both origin and host countries, have effects. As a corollary, we suggest that although poor financial discipline by host governments has been widely blamed as the primary factor likely to frighten off overseas investors, it is amongst FDI supplying nations that the effects of sovereign yields seem most pronounced. Policymakers in countries seeking to attract FDI should not only be attentive to domestic conditions, but also be aware of the financing environment that multinational enterprises (MNEs) encounter in their home countries and how this might impact on their choices.
PDF
