INSUBCONTINENT EXCLUSIVE:
The Reserve Bank of India has come a long way from the days when monetary policy statements would average 13,000 words.That's more than
the average length of a Masters thesis in economics and was before the adoption of inflation targeting in 2016
Since then, the central bank has become briefer and less complex in its policy communication, according to a recent paper published by the
Indira Gandhi Institute of Development Research in Mumbai.RBI statements have averaged 3,084 words in the post-inflation targeting regime,
still pretty high if compared to the Federal Reserve's average of 500 words, the paper's authors, Aakriti Mathur and Rajeswari Sengupta,
The readability of the RBI's statements -- based on the number of one syllable words in the text -- has also improved.The researchers
matched the policy communication against financial market performance and found that longer and more complex statements were associated with
greater volatility in stock market returns over the past 20 years
comprehend, then the transmission to financial markets is likely to be weak, which is what we find in our empirical analysis," the authors
say in the report.Long and complicated communication on the economy make it difficult for investors to understand the regulator's position
"This creates a wider degree of dispersion in participant's beliefs, which gets reflected in higher financial market volatility," they
said.With the introduction of inflation targeting, the RBI set up a six-member Monetary Policy Committee to decide interest rates every two
The policy statement is followed shortly after by a press conference with the central bank governor and his deputies.The RBI also releases
minutes of each meeting within two weeks of the event, disclosing how each member voted and why.
