Can Central Bank’s Communication Effectively Deal with Emergency?Text Analysis based on Communication Event of People’s Bank of China

This paper studies the effectiveness and mechanism of central bank’s communication in stabilizing stock market volatility under major emergencies. Firstly, studying the policy effects of central bank communication under three emergencies, the results indicate that central bank’s communication had the best effect in suppressing stock market volatility during the COVID-19 period in 2020, time-varying studies in different periods also show that central bank’s;communication could stabilize stock market volatility in the short term, but the medium and long term effects are not obvious and might even aggravate market volatility. Secondly, the results of mediating effect regression show that investor sentiment is an important transmission channel between central bank’s communication and stock market fluctuations. Moreover, there is a dynamic time-varying relationship between central bank’s communication, investor sentiment and stock market volatility. Central bank’s communication could effectively regulate investor sentiment, and investor sentiment and stock market volatility are positively correlated.