Does the Central Bank’s perception regarding the state of the economy affect industrial entrepreneurs’ expectations? Are such expectations important for investment? Evidence from Brazil

Studies on central bank communication in emerging countries are still scarce. There are no studies regarding the influence of central bank communication on entrepreneurs’ expectations. This paper contributes to the literature in the following aspects: (a) based on the minutes of the Monetary Policy Committee (Copom) meetings, we develop an indicator that reveals the Central Bank’s perception related to the state of the economy, and (b)we analyze the influence of the Central Bank’s communication on the expectations and confidence of entrepreneurs, and the influence of such expectations on the aggregate investment. The findings reveal that the information provided by the Central Bank of Brazil regarding the economic environment affects entrepreneurs’ expectations and that aggregate investment is influenced by these expectations.