Risk and uncertainty in central bank signals: an analysis of MPC minutes
Repo rate decisions are central to the communication of monetary policy but they do not constitute the only channel by which such policy is communicated. A more comprehensive analysis of the signaling aspect of monetary policy requires study of all relevant channels, including discursive channels such as meeting minutes, press releases etc. This opens up the scope for signal uncertainty. We introduce a heuristic framework for the study of signal uncertainty, and use this to analyses 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.
Working paper: SCEME023_DowKlaesMontagnoli_2008.pdf
Bibliographic details:
Dow, S.; Klaes, M.; Montagnoli, A. 2008. Risk and uncertainty in central bank signals: an analysis of MPC minutes. SCEME Working Paper No. 23.
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