War of the Words: How Elites' Communication Changes the Economy

Baerg, Nicole Rae (2014): War of the Words: How Elites' Communication Changes the Economy.

Abstract

How does variation in the clarity of elites’ communication change the economy? Previous re- search shows that elites’ communication changes the economy, but not all messages are crafted equally. Models of strategic communication suggests that clearer and precise information can improve the economy more than ambiguous messages. In order to test this claim, I develop a new dataset of political elites’ inflation statements and measure each statements’ information precision. I then test whether or not economic performance depends on how precisely political elites communicate. I find evidence that an increase in information precision, through its attenuating effects on inflation expectations, lowers inflation. Furthermore, I find that this is true when examining a number of developing countries over a relatively volatile time period.

• Item Type: MPRA Paper
• Language: English
• Keywords: central bank communication, clarity, inflation, inflation expectations
• Subjects: E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E31 - Price Level ; Inflation ; Deflation; E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E52 - Monetary Policy; E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E58 - Central Banks and Their Policies

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