Abstract
Inflation targeting requires clear and transparent central bank’s communication. Analysts and market participants understand it as a broad list of information disclosed by the central bank. The general public understands it rather as the ability of a central bank to speak and explain its decisions in a plain language. In recent decades, monetary authorities in many countries have made significant progress in this direction. However, there has been no research on the quality of communication for the Bank of Russia. This paper aims to create a tool for automated evaluation of the readability of the Bank of Russia’s monetary policy communication, taking into account the available experience of linguistic and textual analysis, including machine learning methods, as well as to provide recommendations for its improvement. This can contribute to improving the effectiveness of the Bank of Russia communication on monetary policy, which is vital for its credibility, anchoring inflation expectations, and predictability of the regulator’s decisions.
Highlights
As the Bank of England analyst Jonathan Fullwood (Fullwood, 2016) has observed, today’s central bank texts are unnecessarily complex
The authors note that better understanding of the risks associated with monetary policy surprises has led to greater transparency in central banks, but quantifying it using the method proposed by Dincer and Eichengreen (2008) does not take into account aspects of communications such as volume, readability, or the sentiment that they transmit
The graphs show that Bank of Russia monetary policy communications are classified by the model mainly as falling into the first, second, and third levels of readability, that is, they are comprehensible to people with higher education in economics or even with academic degree in economics
Summary
As the Bank of England analyst Jonathan Fullwood (Fullwood, 2016) has observed, today’s central bank texts are unnecessarily complex. There have been no automated tools for assessing the readability of texts on monetary policy issues to determine their comprehensibility to the general public, which is of particular importance in the context of an inflation targeting regime, with its focus on openness. Another important contribution is the compilation of a specialised training corpus out of 10,000 texts marked according to level of complexity.
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