The timing of central bank communication

Ehrmann, Michael; Fratzscher, Marcel

doi:10.1016/j.ejpoleco.2006.09.015

Cited by 69 publications

(38 citation statements)

References 23 publications

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“…31 This is also in line with earlier findings, that suggest that economic outlook communication generally moves financial markets only very little (Ehrmann and Fratzscher (2005c) is much driven by their outlook on future price developments, that mostly are private information to the central bank. Somewhere between these two extremes lies the (lower) surprise generated by the interpretation of monetary developments.…”

supporting

confidence: 79%

The Impact of ECB Communication on Financial Market Expectations

Lamla

Rupprecht

2006

SSRN Journal

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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. (2006), that quantifies the contents of the ECB's introductory statements, we find that communication affects the term structure of interest rates in the medium run over a horizon between five months to one year. Our results suggest that financial market agents expect the ECB to prepare them for a change in interest rates well in advance. However, judging upon the dynamics of the response, the exact timing of a decision is less foreseeable. Disentangling the effects of ECB statements on prices, the real and the monetary sector, we provide evidence that especially the ECB's interpretation and forecasts of price developments represent important news to financial market agents. Terms of use: Documents in EconStor may JEL classification: E43, E44, E58

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supporting

confidence: 79%

The Impact of ECB Communication on Financial Market Expectations

Lamla

Rupprecht

2006

SSRN Journal

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“…33 The importance of news from FOMC meetings on FX markets versus news from other central banks has also been examined for money announcements by Ito and Roley (1987) and central bank interventions by Dominguez (2003). More recent comparative studies on central bank communication by Ehrmann and Fratzscher (2007) The evidence of the return-volume relation on FOMC days is presented in columns (5) and (6) , remains significant at the 5% level regardless whether we control for FOMC t (see column 6). The variable, Ds USD t , is found to be positively correlated with daily USD volume.…”

Section: Usd Volume and Federal Funds Futuresmentioning

confidence: 96%

Does FOMC news increase global FX trading?

Fischer¹,

Ranaldo²

2011

Journal of Banking & Finance

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a b s t r a c tDoes global currency volume increase on Federal Open Market Committee (FOMC) days? To test hypotheses of abnormal currency volume on FOMC days, a new data set from the Continuous Linked Settlement (CLS) Bank is used. The CLS measure captures more than half of the global trading volume in foreign exchange (FX) markets. The evidence shows that FX trading volume increases about 5% in the spot and the spot-next market following FOMC deliberations. The novelty of this result is that the aggregated CLS data controls for responses in various derivatives markets: a feature that existing studies based on intradaily data for specific trading platforms do not consider.

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“…Furthermore, in the case of the ECB, national central banks feel they are responsible for explaining ECB policies to their respective national audiences. Ehrmann and Fratzscher (2007c) have analyzed the timing of communication by individual ECB Governing Board members. Figure 1, which is reproduced from this study, shows that except for days surrounding the monetary policy meetings, there is a somewhat higher level of activity before than after meetings (which is statistically significant at the 5% level), stressing the attempt of the ECB to prepare markets for the upcoming meeting.…”

Section: The Ecb's Communication Policymentioning

confidence: 99%

“…The first and last bars additionally contain 22 observations on days beyond ±8. Source: Ehrmann and Fratzscher (2007c) further details). 6 The ECB uses indirect signals, often in the form of code words like 'vigilance.'…”

Section: The Ecb's Communication Policymentioning

confidence: 99%

The effect of ECB communication on interest rates: An assessment

Haan

2008

Rev Int Organ

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This paper reviews the literature on the communication policy of the European Central Bank (ECB) addressing two questions. First, to what extent has ECB communication affected interest rates? Second, to what extent has ECB communication affected the predictability of the ECB's interest rate decisions? On the basis of a survey of empirical studies, it is concluded that various forms of ECB communication lead to more volatility. However, studies focusing on volatility cannot assess whether markets moved in the intended direction. To analyze whether this is the case, researchers have coded ECB communications. Studies using this approach yield evidence that communications generally move financial markets in the intended direction. There is also substantive evidence that ECB communications increase the predictability of interest decisions by the ECB Governing Council. Finally, the consequences of the fact that ECB officials often gave contrasting signals to market participants are analyzed. New evidence suggests that inconsistent communication causes agents to make less accurate predictions. The policy implication is that central bankers should take care that their statements are consistent.Keywords Central bank communication . ECB JEL Classification E43 . E52 . E58"Our keen preoccupation with making ourselves understood by words and deeds has established a new climate of mutual understanding with academics, investors, market participants and public opinion at large." (Trichet 2005) Rev Int Organ (2008) 3:375-398

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The timing of central bank communication

Abstract: In 2005 all ECB publications will feature a motif taken from the €50 banknote. WO R K I N G PA P E R S E R I E S N O. 5 6 5 / D E C E M B E R 2 0 0 5 C O N T E N T S Abstract 4Non-technical summary 5

Cited by 69 publications

References 23 publications

The Impact of ECB Communication on Financial Market Expectations

The Impact of ECB Communication on Financial Market Expectations

Does FOMC news increase global FX trading?

The effect of ECB communication on interest rates: An assessment

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