JACIII Vol.27 No.5 pp. 896-906
doi: 10.20965/jaciii.2023.p0896

Research Paper:

Research on the Measurement of Central Bank Communication Index and its Impact on the Macroeconomy

Jiayi Liao and Jing Zheng

College of Economics, Hangzhou Dianzi University
No.1158, No.2 Street, Qiantang District, Hangzhou, Zhejiang 310018, China

Corresponding author

April 16, 2023
May 20, 2023
September 20, 2023
monetary policy, macroeconomy, central bank communication, TVP-FAVAR model, LDA model

With the increasing size of financial assets and the complexity of monetary patterns, countries around the world are gradually becoming more transparent in their monetary policies, using central bank monetary policy communication as a new type of monetary policy instrument. To measure central bank communication more accurately, this paper proposes a dynamic topic model, LDA-BP, based on branching processes, to construct the central bank communication index. At the same time, this paper does four things: it uses the constructed communication index as a proxy variable for the new monetary policy instrument; it builds a TVP-FAVAR model that can extract potential macroeconomic information from many variables, and its time-varying nature can better reflect the dynamic regulatory effect of monetary policy; it constructs a three-dimensional impulse response diagram; and it conducts a systematic analysis of macroeconomic impact. The experimental results of demonstrate its effectiveness on central bank monetary policy communication, as it captures timely information about conventional monetary policy instruments and immediately responds to changes in interest rates and money supply. All three monetary policy instruments are effective in smoothing output volatility, with monetary policy communication having a longer-term impact on the macroeconomy.

Impulse response of Chibor and M2

Impulse response of Chibor and M2

Cite this article as:
J. Liao and J. Zheng, “Research on the Measurement of Central Bank Communication Index and its Impact on the Macroeconomy,” J. Adv. Comput. Intell. Intell. Inform., Vol.27 No.5, pp. 896-906, 2023.
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