Mario González, Banco Central de Chile

Paper: “Some Inflation Targeting Central Banks Are More Similar Than Others”

Abstract: In the last couple of decades, several countries have adopted inflation targeting as their monetary policy framework. In their monetary policy meetings, these institutions determine target interest rates and prepare press releases which are used to disclose their policy decision and the rationale behind them. We study these press releases to understand if they implement their monetary policy differently despite them being inflation targeting countries. First, we investigate to see if there are differences in how quickly they adjust their policy rate after releasing new information. Second, we examine the variation in topics highlighted by each bank. Finally, we ask if there is a relation between the speed of adjustment and topics covered. Using linguistic methods we find that after releasing new information some central banks adjust their policy rates faster while others wait several meetings. We also find that central banks put more emphasis on activity, expectations, and inflation, instead of financial markets, global economy and risk. Finally, we observe that countries prioritizing expectations in their press releases tend to adjust their monetary policy rates sooner than those focusing on activity.