Central Bank Communication Design: Towards Transparency of Monetary Policy

Abstract

The object of the article is central bank communication design (particularly target audience, channels and instruments) and central banks’ transparency measurement. The purpose is to summarise the central bank communication policy's conceptual basics and clarify how transparent the NBU’s monetary policy is. Methodology. The paper applies the Dincer and Eichengreen (2014) and Al-Mashat et al. (2018) methods of transparency measurement, using the NBU’s published documents and website data as of 2021. Results. It has been emphasized that communication design should be based on central bank’s communication objectives, information demand from defined stakeholders and target groups, capabilities of application of channels and instruments. Ensuring confidence in monetary policy calls for simplified language and format that reflects the general public's interest. The shift to the growing role of the type of communication channel and interaction of central bank with the general public are marked out. The meaning of transparency, criteria, and indices (Eijffinger-Geraats, Dincer-Eichengreen, Crowe-Meade, Cournede-Minegishi, CBT-IT index) are under consideration. According to Dincer and Eichengreen, the NBU’s transparency index reaches almost a perfect score of 12 (out of 15), affirming NBU’s political and policy transparency improvements. The NBU’s CBT-IT transparency index scores 11.45 (out of 20), which points to the need to eliminate gaps of the FPAS designed to support full-fledged inflation- forecast-targeting (3.2 out of 9) in the light of improvements in the monetary policymaking process (5.75 out of 7) and transparency about monetary policy objectives (2.5 out of 3). Practical implications. The enhancement of the NBU’s transparency level reflects the development of its communication policy as transparency of monetary policy requires constant and coherent messages via diversified channels and instruments for a defined target audience, following a clear purpose of strategic communication. Value/originality. It has been highlighted that central bank communication design is the basis for financial market participants' trust, favouring monetary policy transparency.