Words Matter: Central Bank Communication and Household Expectations in a Global Panel

This paper studies how the linguistic features of central bank communication affect household economic sentiment. Linking central bank speeches from 29 countries to individual-level data from the Gallup World Poll (2006–2023), we examine whether speech complexity—captured through sentiment, tone, length, and readability—is associated with public perceptions of the economy and labor market. We find that longer and more syntactically complex speeches are consistently linked to lower economic confidence and less favorable views of the job climate. Positive sentiment in modal (i.e., policy-relevant) sentences is associated with more optimistic household outlooks. These effects are stronger among younger and college-educated respondents, suggesting differential processing of complex information. These findings underscore the importance of clarity and tone in central bank messaging and support the view that communication is a key behavioral channel of monetary policy transmission.