Citation:

Masaaki Yoshimori. "Critical Damping in Monetary Policy Communication: A Communication Resonance Approach to Expectation Management" International Research Journal of Economics and Management Studies, Vol. 5, No. 7, pp. 92-103, 2026. Crossref. http://doi.org/10.56472/25835238/IRJEMS-V5I7P112

Abstract:

This paper develops the Communication Resonance Model, a novel framework that applies concepts from engineering and control theory to monetary policy communication. Contrary to the conventional assumption that greater transparency always improves policy effectiveness, the model argues that communication can either stabilize or destabilize market expectations depending on the degree of damping embedded within the expectation formation process. Expectations are modeled as a second-order dynamic system subject to communication shocks. Simulations identify three regimes: underdamped systems generate volatility and expectation overshooting, overdamped systems create dependence on central bank guidance and weaken price discovery, while critically damped systems achieve the fastest convergence toward equilibrium without instability. The analysis further demonstrates the existence of an optimal communication intensity that minimizes market volatility. The findings suggest that effective communication requires optimization rather than maximization of transparency and provide a new interpretation of central bank independence as a stabilizing damping mechanism.

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Keywords:

Communication Resonance, Critical Damping, Monetary Policy Communication, Central Bank Credibility, Expectation Dynamics.