Media formats and their role in the perception of monetary policy

Central banks are key institutions in the economy. Their decisions and communication have a significant impact far beyond financial markets. By using different communication channels and formats, central banks can convey their messages more clearly and understandably, resulting in better information and stable economic conditions.

In a recent study, Elliott Ash, Heiner Mikosch, Alexis Perakis and Samad Sarferaz conduct a detailed investigation of different media formats, including text, image, audio and video. They analyse how these formats influence the perception and understanding of monetary policy messages. The aim is to assess the effectiveness of different communication tools and to understand which formats shape households’ inflation expectations the most.

Do some media formats influence inflation expectations more than others?

The research team conducted an experimental study to systematically analyse how different media formats can influence inflation expectations. Using a survey, participants were randomly assigned to one of six groups. Each group received different media formats, including text, photo, audio, audio & photo, and video. After receiving the different media formats, participants expressed their short- and medium-term inflation expectations, which were then compared with their expectations before receiving the media to assess the impact of the different formats.

The different groups were exposed to different treatments, each containing a different presentation of statements made by Christine Lagarde, President of the European Central Bank (ECB). These statements included information about the ECB’s two per cent inflation target. Participants in the text group received only the transcript of Lagarde’s statements, while the photo group also received a photo of her. The audio group heard the original audio recording of Lagarde’s statements, and the video group saw the original recording of the press conference. Other groups experienced a combination of these formats to explore the multiple influences of media formats on participants’ perceptions and expectations.

Dynamic media formats work better than static formats

The results of the study suggest that dynamic media formats, especially audio and video, have a stronger influence on household inflation expectations than static formats such as text and photos. Adjustments in inflation expectations were about twice as high for the more dynamic media than for static photos. Video showed the strongest effect, leading to the largest average adjustment towards the ECB’s two per cent inflation target.

The study is closely related to previous research that analysed the influence of different information and the portrayal of monetary policy committee members on inflation expectations. Compared with this work, however, the current study offers a broader and cross-media analysis of the effects of different communication media, which allows for more robust causal conclusions owing to the experimental approach.

The results of the study are highly significant for central banks that want to optimise their communication strategies. They underline the fact that the chosen medium can have a significant impact on the effectiveness of communication. Strategic considerations around both content and medium are crucial to optimally support monetary policy objectives and strengthen public confidence in monetary policy decisions.