Crafting Consensus: Why Central Bankers Change their Speech and how Speech Changes the Economy
My primary research focuses on the political economy of economic policymaking by committees, especially related to monetary and fiscal policies. My manuscript project “Crafting Consensus” is currently available from Oxford University Press
My book examines how/why central bank communications vary over time and across cases. My argument is that preciseness of central bank communications depends on the strategic behavior of central bank committee members. My theory suggests that when committee members have divergent preferences, central bankers present information more precisely than if there was either a single authority making monetary policy or if committee members have aligned preferences. The contribution of theory is that I show how the level of central bank transparency on a committee is constrained by the preferences of the committee members. I then show how variation in the way that information is presented to the public helps explain variation in economic policy outcomes, especially inflation outcomes, across countries and over time.
In order to test these claims, I combine machine learning, experimental surveys, and statistical analysis. In one empirical chapter, I associate variation in central bankers’ preferences on the Federal Open Market Committee (FOMC) with variation in their official announcements. I find supportive evidence that changes in the preferences of central bankers is associated with changes in the preciseness of public information. In a second empirical chapter, using an experimental survey of German households, I show that inflation expectations respond more to precise rather than vague central bank information. Finally, in a third empirical chapter, using a panel of countries from Latin America, I test the applicability of my argument for higher-inflation countries and over a longer time period.
The manuscript includes the development and analysis of new data from the FOMC, from Germany, and from Latin America. It combines a formal model, primary resource research, survey data, and time-series cross-sectional analysis to analyze the research questions from a variety of angles across a range of countries and time periods.