NO : WP-2019-012
Title: Analysing monetary policy statements of the Reserve Bank of India
Authors: Aakriti Mathur and Rajeswari Sengupta
JEL classification: E52, E58, G12, G14
Keywords: Monetary policy, central bank communication, linguistic complexity, financial markets, textual analysis, natural language processing.
We quantitatively analyse the monetary policy statements of the Reserve Bank of India (RBI) between 1998–2018, across five governor regimes. Using natural language processing tools, we show that there has been a persistent semantic shift in RBI’s monetary policy communication since adoption of inflation targeting. We construct measures of linguistic and structural complexity that capture governor-specific trends in communication. RBI’s communication is linguistically complex on average, but the length of monetary policy statements has gone down and readability has improved significantly recently. Our results indicate that lengthier statements are linked to higher volatility in equity and currency markets, but not bond markets