Chorus in the Cacophony: Dissent and Policy Communication of India's Monetary Policy Committee

Using minutes of consecutive Monetary Policy Committee (MPC) meetings of the Indian central bank, we have constructed two novel measures of implicit dissent at the individual level as well as across groups. We have used VADER sentiment analysis to arrive at the proposed measures and investigated their influence on anchoring Indian growth and inflation forecasts. Our empirical findings show discordance among members increases forecast accuracy. This implies promoting an environment that supports nuanced opinions could improve policy outcomes.

Automated summary

Based on consecutive MPC meetings of the Indian central bank, we have developed two innovative measures of implicit dissent at both individual and group levels. By utilizing VADER sentiment analysis, we have examined the impact of these measures on anchoring growth and inflation forecasts in India. Empirical findings demonstrate that increased discordance among committee members enhances forecast accuracy, highlighting the importance of fostering an environment that embraces diverse opinions for better policy outcomes.