Evaluation of central bank communication phenomenon based on readability indices

Nowadays, the Russian monetary authority conducts a monetary policy by setting an inflation target. There are some evidence that this regime allows central banks to control the price level both in developed and emerging countries. The key success factor for inflation targeting implementation is the confidence of the central banks that their actions are clearly understood by economic agents. Thus, the central bank communication plays a crucial role among the monetary policy tools. Therefore, it draws researchers focus toward understanding of how communication affects the economic behavior. Aim. To apply quantitative linguistic analytical tools for evaluating complexity of central bank communication. Methods. Content analysis, regression analysis. Results. Our research hypothesis is based on the assumption that the readability of the central banks information exerts an influence on economic behavior, in particular, on inflation expectations. For our study, we carry out some press releases concerning the change in key rate issued by the Bank of Russia. We calculate Flesh readability indices for each sample. Then, we estimate a regression between the indices and inflation expectations. Our findings confirm a moderate relation between these variables. The results make contribution to development of central bank communication.