Risk and uncertainty in central bank signals: an analysis of monetary policy committee minutes

Sheila Dow, Matthias Klaes, Alberto Montagnoli

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    Abstract

    This paper considers the signalling aspect of monetary policy. We introduce a heuristic framework for the study of signal uncertainty, and use this to analyse the signal uncertainty implicit in the communications of the Bank of England's Monetary Policy Committee (MPC). Our findings suggest that frequencies of key terms expressing signal uncertainty in MPC minutes may either reflect the degree of confidence implicit in MPC deliberations, or offer evidence for the presence of an irreducible kind of signal uncertainty that shows up as white noise, casting doubt on the soundness of the various qualitative uncertainty indices found in the literature.

    Original languageEnglish
    Pages (from-to)584-618
    Number of pages35
    JournalMetroeconomica
    Volume60
    Issue number4
    DOIs
    Publication statusPublished - Nov 2009

    Keywords

    • INFORMATION
    • MODEL
    • REPUTATION
    • RATIONAL EXPECTATIONS
    • INTEREST-RATES

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