This research explores the Evolution of Central Bank communication.

There have been four major shifts over the past few decades, one of which is the explicit use of communication as a policy tool known as forward guidance.

A forward guidance indicator (FGI) is based on the idea that communication on the stance of monetary policy can be translated into a sentiment index, which identifies the direction and magnitude in which they intend to influence markets (inflation expectations/interest rates). With this technique, we can evaluate how consistent and effective the central bank has communicated its monetary policy.