Let's Talk about Debt - Assessing How Central Bank Communications Frame Ggovernment Spending and Financial Stability

• In Event: Public Policies in Comparative Perspectives

Abstract

Central bank communication is a key part of their role in the financial system for its influence on economic markets, political actors, and the public. However, much of the scholarly analysis has focused specifically on monetary policy committee decisions (i.e. interest rate changes) rather than the broader socio-economic narrative building done within these communications. Examining central banks speeches from G20 countries since 1997, this paper systematically compares changes in central bank narratives around public debt, household debt, and financial stability from before, during, and after the COVID crisis. Two broad narrative tracks will be assessed. First, after spending most of the last decade focused on inflation and spending controls, many governments in the Global North enacted large-scale fiscal programs in response to the pandemic which ballooned their debt levels. Central banks facilitated this spending by maintaining low interest rates among other tools. However, more recent inflation concerns have lead most to dramatically increase interest rates creating different pressures on government debt. Second, many economies have also seen burgeoning household debt which increasingly threatens the financial security of families’ in light of the recent cost of living crisis. In turn, central banks taken notice of the financial stability implications of this trend. The paper finds while there is some common economic narratives, there are also important nuances depending on how the financial system is seen to interact with larger socio-economic discourses of growth, budget balancing and austerity within each state opening and limiting policy options.

Author

• Heather McKeen-Edwards, Bishop's University