Monetary Economics and Communication: New Data, New Tools, New and Old Questions

ended

In the last 25 years, communication has become a core lever of monetary policy. This has important implications for academic research in monetary economics -- an area intrinsically linked to the policy environment. The framework change raises new questions, and we must rethink how we empirically study existing questions. We need new approaches and new data. My ground-breaking research agenda, rooted in important academic questions, comprises of 6 pioneering projects across 3 related themes that emphasise the increasingly-important role of central bank communication in policy. Theme I concerns the fundamental empirical question in monetary economics: what is the effect of monetary policy? Though an old question, two projects innovate by using tools from data science to develop new measures of monetary and information shocks from central bank communication. Three projects in Theme II examine the issue of monetary communication and expectations management. The projects will (i) test, for the first time, the Morris-Shin prediction that communication might overly-coordinate expectations formation; (ii) develop a rich, new high-frequency dataset of expectations for EU countries to enable us to better address the questions in this theme; and (iii) develop new surveys and pioneering research on the role of the communication in affecting expectations of the general public. Theme III examines the complex interaction between monetary policy and uncertainty; monetary policy both reacts to shocks to the economy, but it is also a source of policy uncertainty. We shall develop new indices of each type of uncertainty. This unique combination is central to our being able to understand the complex, but vital, relationship. The novelty of the data and the complexity of analysing communication make this research program highly ambitious. Nonetheless, the importance of developing our academic understanding make this agenda incredibly high-return.