Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/201704
Authors: 
Mathur, Aakriti
Sengupta, Rajeswari
Year of Publication: 
2019
Series/Report no.: 
Graduate Institute of International and Development Studies Working Paper 08-2019
Abstract: 
In this paper we quantitatively analyse monetary policy statements of the Reserve Bank of India (RBI) from 1998 to 2017, across the regimes of five governors. We first ask whether the content and focus of the statements have changed with the adoption of inflation-targeting as a framework for conducting monetary policy. Next, we study the influence of various aspects of monetary policy communication on financial markets. Using natural language processing tools, we construct measures of linguistic and structural complexity that capture governor-specific trends in communication. We find that while RBI's monetary policy communication is linguistically complex on average, the length of monetary policy statements has gone down and readability has improved significantly in the recent years. We also find that there has been a persistent semantic shift in RBI's monetary policy communication since the adoption of inflation-targeting. Finally, using a simple regression model we find that lengthier and less readable statements are linked to both higher trading volumes and higher returns volatility in the equity markets, though the effects are not persistent.
Subjects: 
Monetary policy
central bank communication
linguistic complexity
financial markets
textual analysis
natural language processing
JEL: 
E52
E58
G12
G14
Document Type: 
Working Paper

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