Does the Clarity of Inflation Reports Affect Volatility in Financial Markets?
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Summary:
We study whether clarity of central bank inflation reports affects return volatility in financial markets. We measure clarity of reports by the Czech National Bank, the European Central Bank, the Bank of England, and Sveriges Riksbank using the Flesch-Kincaid grade level, a standard readability measure. We find some evidence, mainly for the euro area, of a negative relationship between clarity and market volatility prior to and during the early stage of the global financial crisis. As the crisis unfolded, there is no longer robust evidence of a negative connection. We conclude that reducing noise using clear reports is possible but not without challenges, especially in times of crisis.
Series:
Working Paper No. 2014/175
Subject:
Banking Communications in revenue administration Financial crises Financial institutions Global financial crisis of 2008-2009 Inflation Prices Revenue administration Stocks
English
Publication Date:
September 24, 2014
ISBN/ISSN:
9781498392914/1018-5941
Stock No:
WPIEA2014175
Pages:
29
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