Browsing by Subject "Randomized Controlled Trial"

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Essays on central bank communication
(2023-04-21) Carneiro Mira Godinho, Frederico; Coibion, Olivier; Bhattarai, Saroj, 1981-; Eusepi, Stefano; Coronado, Julia
This dissertation consists in three chapters addressing the relationship between central bank communication and the transmission of monetary policy to a range of different audiences. In the first chapter, I show that once one incorporates country-specific yields into the identification of monetary factors for the European Central Bank, a new factor arises which plays a quantitatively important role in explaining the end of the sovereign debt crisis and the resulting convergence in economic outcomes across the Euro block. Specifications that exclude this novel factor instead imply that the central bank played little role in ending the crisis. I argue that this new factor reflects ECB communications that respond to certain countries’ conditions beyond their share of Euro area activity, mostly during the crisis period. In the second and third chapters, I address how the complexity in the language used in policy statements affects economic outcomes. More specifically, in the second chapter I look at the textual information in monetary policy announcements to show that complex language reduces the effects of monetary policy shocks on asset prices. Finally, in the third chapter I look at how the general public, a non-specialized audience, reacts to distinct policy statements that only differ in the complexity of the words used, by making use of a novel Randomized Control Trial experiment with new survey data. For this audience, a simpler message is more effective in shaping households’ expectations and enhancing understanding, but it reduces the credibility of the Federal Reserve relative to more complex, and less easily understood, communication.