Quest for central bank communication: Does it pay to be “talkative”?

On the basis of a unique database of policy makers' verbal comments, we find that central bank “talk” in the Czech Republic, Hungary, and Poland influences behavior of financial markets. This effect, however, differs among the countries. The CEC3 central banks' communication strategies are far from uniform. The CNB does a better job than the other central banks in matching words with deeds. Communication affects monetary policy predictability, but results depend on the committee structure and communication style. Finally, we provide evidence that pursuance of too many targets leads to inconsistencies in central bank communication.