Central Bank Communication and its Role in Ensuring Financial Stability

Abstract

An ongoing challenge for central banks is represented by communication policy paradox, which involves the effectiveness of monetary policy strategies in pursuing financial stability. The communication paradox captures the idea that an increasing level of communication and transparency of central banks, along with more efficient economic policies will lead to a higher level of financial stability. The paper aims to outline the communication policy significant implication on the effectiveness of monetary policy, starting with a qualitative approach and continuing with an empirical analysis based on the example of four central banks, namely BOJ, ECB, FED and NBR.

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