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Do European Central Bank'S Statements Steer Interest Rates In The Euro Zone?

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  • MARIE MUSARD-GIES

Abstract

In this study, we aim at testing whether press conferences held after the meeting of the European Central Bank's monetary policy council steer market interest rates in the Euro zone. To meet this goal, we quantify the statements according to whether they are neutral, hawkish or dovish. We show, using a principal components analysis, that market interest rates react significantly to the bias in statements, and more particularly to changes in statements from one meeting to the next. Moreover, we find that the short end of the yield curve reacts more sharply to statements than the long segment: the effect of statements peaks on interest rates with a maturity of 6 or 12 months and is smaller for the longer maturities. Using non-parametric tests confirms our previous results. Copyright � 2006 The Author; Journal compilation � 2006 Blackwell Publishing Ltd and The University of Manchester.

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Bibliographic Info

Article provided by University of Manchester in its journal Manchester School.

Volume (Year): 74 (2006)
Issue (Month): s1 (09)
Pages: 116-139

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Handle: RePEc:bla:manchs:v:74:y:2006:i:s1:p:116-139

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Cited by:
  1. Stefan Gerlach, 2007. "Interest Rate Setting by the ECB, 1999-2006: Words and Deeds," International Journal of Central Banking, International Journal of Central Banking, vol. 3(3), pages 1-46, September.
  2. Alan S. Blinder & Michael Ehrmann & Marcel Fratzscher & Jakob De Haan & David-Jan Jansen, 2008. "Central Bank Communication and Monetary Policy: A Survey of Theory and Evidence," Working Papers 1038, Princeton University, Department of Economics, Center for Economic Policy Studies..
  3. Bennani, Hamza, 2014. "Does one word fit all? The asymmetric effects of central banks' communication policy," MPRA Paper 57150, University Library of Munich, Germany.
  4. Carlo Rosa & Giovanni Verga, 2008. "The Impact of Central Bank Announcements on Asset Prices in Real Time," International Journal of Central Banking, International Journal of Central Banking, vol. 4(2), pages 175-217, June.
  5. Rosa, Carlo, 2013. "Market efficiency broadcasted live: ECB code words and euro exchange rates," Journal of Macroeconomics, Elsevier, vol. 38(PB), pages 167-178.
  6. Bennani, Hamza, 2014. "The art of central banks' forward guidance at the zero lower bound," MPRA Paper 57043, University Library of Munich, Germany.

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