Central bank communication complexity during wartime and inflation expectation alignment

Type of the article: Research ArticleAbstractThis study examines the post-decision announcements of the National Bank of Ukraine (NBU) during the pre-war and wartime periods from 2018 to 2025, focusing on changes in communication complexity and their subsequent impact on the anchoring of household inflation expectations. Based on various readability measures, we document a significant increase in the linguistic complexity of NBU communications during the war. For example, the Flesch-Kincaid Grade Level index indicates that the number of years of schooling required to understand NBU announcements increased by approximately one additional year. Despite these changes, we find no statistically significant effect on the gap between household inflation expectations and the NBU’s inflation forecast. At the same time, the expectations gap narrowed substantially during the war period, likely due to the convergence of households and NBU predictions under shock conditions. Moreover, the gap continued to narrow as inflation pressures eased. Our econometric analysis relies on dynamic specifications with robust inference to account for persistence, serial correlation, and structural breaks associated with the full-scale invasion. The findings contribute to the literature on central bank communication by providing rare wartime evidence from a small open economy, highlighting the limits of textual complexity as a policy tool for shaping household expectations.