Monetary policy communication influences market’s inflation perceptions and helps align them with the central bank’s objectives, thus contributing to the efficacy of monetary policy. However, effective monetary policy communications largely depend on the central bank’s transparency, institutional credibility, and readability of its monetary policy reports. This study focuses on evaluating the readability and content of BSP’s monetary policy reports. By using the Flesch-Kincaid (FK) Readability Test, this paper assesses the readability of the BSP’s monetary policy press statements and highlights of the Monetary Board meetings issued from 2002-2018, and compares the readability of these policy communications with comparable publications issued by other central banks. To assess whether the readability of such monetary policy reports remains consistent regardless of prevailing economic conditions or the BSP’s corresponding actions, the study looks at readability with consideration to (a) early inflation targeting (IT) years and late IT years, (b) crisis and non-crisis periods, (c) by type of policy adjustment, (d) by type of policy instrument used, and (e) by type of adjustment and instrument used. The study also analyzes the information content of the BSP’s monetary policy statements using word clouds and word frequency charts to identify the frequently used words in these communications and determine the key themes that shaped monetary policymaking.
The FK scores of the BSP’s policy communication reveal that the BSP’s monetary policy reports would be best understood by college graduates and working professionals, broadly suitable for the BSP’s immediate target audience which consists of market analysts and financial market participants. Meanwhile, analysis of word clouds and word frequency charts show that “inflation” is the most frequently used word in the BSP’s monetary policy press statements, while the words “target”, “expectations”, and “outlook” are closely associated with “inflation”. These findings are consistent with the BSP’s role as an IT central bank and its forward-looking approach in the conduct of monetary policy.
