Can Central Bank Communication Announcements Enhance the Efficiency of Policy Interest Rate Transmission?
The report of the 20th Communist Party of China National Congress proposed to"deepen the reform of the financial system and build a modern central banking system."Developing a modern central banking system requires facilitating a monetary policy mechanism,which starts with promoting interest rate liberalization.The initial and key link in the transmission of the monetary policy process is the transmission of policy interest rates to short-term interest rates in the money market.Therefore,the main goal of developing a modern central bank is to enhance the efficiency of the transmission of policy interest rates to short-term interest rates.Nevertheless,the short-term interest rate in China's money market has not fully followed the changes in the central bank's policy interest rate in certain periods,especially before 2015.For example,during the"Money Shortage"period in 2013,the short-term market interest rates were detached from policy interest rates.To enhance the efficiency of policy interest rate transmission,the People's Bank of China has been regularly releasing daily announcements since 2016,and for the first time added textual content explaining the rationality of the current open market operations and evaluating the liquidity status of the banking system.This communication strategy of the central bank has improved the efficiency of policy interest rate transmission,narrowing the gap between short-term market interest rates and policy interest rates after 2016.The efficacy of regulating monetary policy would be limited if the short-term interest rate does not shift in the direction of policy interest rate regulation.Therefore,it is of great practical significance to enhance the transmission efficiency of policy interest rates to the short-term interest rate in the money market to improve the effectiveness of a monetary policy.Based on this,this study divides announcements texts into quantitative and qualitative texts.It uses big data text technology to extract the two types of announcements for an empirical study on the impact of central bank communication announcements on the efficiency of policy interest rates to the transmission of short-term market interest rates.The findings reveal that quantitative announcements with clear policy operation targets enhance the efficiency of policy interest rate transmission,while qualitative announcements are not significant.Among all quantitative announcements,open market operation notices(so-called"small notes")have the most significant effect on the transmission efficiency of policy interest rates.Furthermore,this study builds communication tone changes and text similarity index to analyze the effectiveness of small notes.The results indicate that by generating"new information,"the tone changes of the small notes enhance public trust in the open market operating policy and influence the policy interest rate's transmission efficiency.Adjacent small notes with similar communication patterns and phrases enhance public comprehension of public information,increase the correctness of monetary authorities'intentions,and increase the effectiveness of policy interest rate transmission.The main contributions of this study to the literature are as follows.First,most existing studies used low-frequency text announcements(e.g.,monetary policy implementation reports)or irregular communication(the governor's oral communication)as samples.This study focuses on the effects of regular,high-frequency announcements such as open market operation notices,which is helpful for evaluating the effects of central bank communication and comprehending the choice of communication mode.It also provides fresh insight into how to enhance the institutionalized monetary policy communication mechanism.Second,while the majority of studies analyze the effects from the perspective of traditional monetary policy,this study focuses on improving the accuracy of public information and public understanding,reducing the deviation between the central bank and public expectations,helping the public to form consistent expectations,enhancing the efficiency of policy interest rate transmission,and offering empirical data to support the central bank's optimization of its communication strategy.
Central Bank Communication AnnouncementsPolicy Interest Rate TransmissionSmall Notes
万方数据
维普
