The role of ECB communication in guiding markets

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Abstract:Economists and central bankers nowadays believe that forward guidance has become more important in a world in which key interest rates have hit their effective lower bounds (ELB). In case of the European Central Bank (ECB), this should have increased the informational content of the introductory statements at the press conference following ECB policy meetings. We examine whether this form of ECB communication adds information to a shadow interest rate that summarises the overall policy stance as interpreted by financial markets. To measure communication, we use information based on ECB press releases distinguishing between topics like inflation, the real economy and monetary developments. We also look at the effect of communication on consensus expectations about key macroeconomic variables. Especially ECB's assessment of the economy, i.e. communication related to economic growth, triggers movement in financial markets and thereby the shadow rate. Communication of the ECB through its press releases also causes professional forecasters to change their outlook. Not only their growth forecasts are affected, also their expectations for M3 growth and inflation are.JEL classification: E3, E43, E51, E52, E58

Political voice on monetary policy: Evidence from the parliamentary hearings of the European Central Bank

“…On the other side, the central bank has to be accountable. That is to say, it has to act in a transparent way and implement an effective communication policy (see Eijffinger and Hoeberichts, 2002;Issing, 2005;de Haan et al, 2007;Ehrmann and Fratzscher, 2007;Rozkrut et al, 2007;Berger et al, 2011;Siklos and Sturm, 2013;Anderes et al, 2019).…”

Political Voice on Monetary Policy: Evidence from the Parliamentary Hearings of the European Central Bank

“…On the other side, the central bank has to be accountable. That is to say, it has to act in a transparent way and implement an effective communication policy (see Eijffinger and Hoeberichts, 2002;Issing, 2005;de Haan et al, 2007;Ehrmann and Fratzscher, 2007;Rozkrut et al, 2007;Berger et al, 2011;Siklos and Sturm, 2013;Anderes et al, 2019).…”

ECB monetary policy communication events: Do they move euro area yields?

“…Anderes et al. (2021), however, find that ECB communication related to monetary developments affects market‐based inflation expectations. Conrad and Lamla (2010) find that the ECB's assessment of inflation and exchange rates affects the EUR/USD exchange rate.…”