Crafting Consensus: Why Central Bankers Change Their Speech and How Speech Changes the Economy

Central bankers communicate their policies to the mass public through monetary policy committee meetings, which are composed of policymakers with differing interests. Nicole Baerg argues that monetary policy committees composed of members with differing preferences over inflation are better suited to communicating precise information with the public, producing central bank statements of higher quality and less uncertainty. This higher quality statements more effectively shape individuals' inflation expectations and move the economy in ways that policymakers intend. Baerg's empirical analysis offers a new theory of committee decision-making and a battery of empirical tests to provide a rich understanding of modern-day central banking.

Format: Hardback
Length: 184 pages
Publication date: 03 November 2020
Publisher: Oxford University Press Inc

In a world where information sharing is paramount, central bankers have taken to communicating their policies to the general public in greater numbers. These communications are crafted during monetary policy committee meetings, where policymakers with diverse interests come together to write and agree on an official policy statement. Once released to the public, central bank communications have a significant impact on citizens' actions and, ultimately, the economy. However, the process by which these communications shape public opinion and economic outcomes is not straightforward.

In her book, Crafting Consensus, Nicole Baerg delves into the intricacies of central bank communication and explores how the transparency of these statements depends on the preferences of committee members. Baerg argues that monetary policy committees composed of members with differing preferences over inflation are better equipped to communicate precise information with the public. These diverse committees produce central bank statements of higher quality and less uncertainty than those from more homogeneous committees.

Furthermore, Baerg contends that higher-quality statements have a more effective impact on individuals' inflation expectations and can guide the economy in the direction intended by policymakers. By conducting empirical analysis using a range of methods, including historical archival data, textual analysis, machine-learning, survey experiments, and cross-sectional time-series data, Baerg offers a novel theory of committee decision-making and provides a wealth of empirical tests to shed light on modern-day central banking.

Through her research, Baerg demonstrates that central bankers are not impartial technocrats but are influenced by their preferences and the institutional rules within which they operate. This understanding has important implications for understanding the politics of monetary policy and the variations in economic performance over time. Crafting Consensus provides a valuable contribution to the field of economics and sheds light on the complex dynamics of central bank communication and decision-making.

Weight: 384g
Dimension: 148 x 216 x 24 (mm)
ISBN-13: 9780190499488