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Central bank communication and financial markets: New high-frequency evidence

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  • Gertler, Pavel
  • Horvath, Roman

Abstract

This paper examines the financial market impact of intermeeting communication of the members of the European Central Bank’s Governing Council (GC) using high frequency data between July 2008 and January 2014. Constructing a rich dataset of GC members’ public statements (speeches, conference discussions and media interviews) between monetary policy meetings allows us to investigate a detailed pattern of market responses to the ad-hoc communication of central bankers. Using least squares and quantile regressions, we document the impact of policymakers’ public statements on interest rates and the stock market with very little or no impact on exchange rates. In general, we find little evidence that the timing, sequencing or content of communication matters in immediate response. On the contrary, the results suggest that the market concentrates on the communication of key members of the committee.

Suggested Citation

  • Gertler, Pavel & Horvath, Roman, 2018. "Central bank communication and financial markets: New high-frequency evidence," Journal of Financial Stability, Elsevier, vol. 36(C), pages 336-345.
  • Handle: RePEc:eee:finsta:v:36:y:2018:i:c:p:336-345
    DOI: 10.1016/j.jfs.2018.03.002
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    12. Rieder, Kilian, 2022. "Monetary policy decision-making by committee: Why, when and how it can work," European Journal of Political Economy, Elsevier, vol. 72(C).
    13. Niţoi, Mihai & Pochea, Maria-Miruna & Radu, Ştefan-Constantin, 2023. "Unveiling the sentiment behind central bank narratives: A novel deep learning index," Journal of Behavioral and Experimental Finance, Elsevier, vol. 38(C).
    14. Corbet, Shaen & Larkin, Charles & Lucey, Brian & Meegan, Andrew & Yarovaya, Larisa, 2020. "Cryptocurrency reaction to FOMC Announcements: Evidence of heterogeneity based on blockchain stack position," Journal of Financial Stability, Elsevier, vol. 46(C).
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    16. Ehrmann, Michael & Gnan, Phillipp & Rieder, Kilian, 2023. "Central Bank Communication by ??? The Economics of Public Policy Leaks," CEPR Discussion Papers 18152, C.E.P.R. Discussion Papers.
    17. Johannes Zahner, 2020. "Above, but close to two percent. Evidence on the ECB’s inflation target using text mining," MAGKS Papers on Economics 202046, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
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    20. Neugebauer, Frederik, 2019. "ECB Announcements and Stock Market Volatility," VfS Annual Conference 2019 (Leipzig): 30 Years after the Fall of the Berlin Wall - Democracy and Market Economy 203554, Verein für Socialpolitik / German Economic Association.
    21. Amrendra Pandey & Jagadish Shettigar & Amarnath Bose, 2021. "Evaluation of the Inflation Forecasting Process of the Reserve Bank of India: A Text Analysis Approach," SAGE Open, , vol. 11(3), pages 21582440211, July.
    22. Collingro, Franziska & Frenkel, Michael, 2020. "On the financial market impact of euro area monetary policy: A comparative study before and after the Global Financial Crisis," Global Finance Journal, Elsevier, vol. 45(C).
    23. Luca Alfieri & Mustafa Hakan Eratalay & Darya Lapitskaya & Rajesh Sharma, 2022. "THE EFFECTS OF THE ECB COMMUNICATIONS ON FINANCIAL MARKETS BEFORE AND DURING COVID-19 PANDEMICAbstract:The paper aims to estimate the effects of the European Central Bank communications on the sectora," University of Tartu - Faculty of Economics and Business Administration Working Paper Series 140, Faculty of Economics and Business Administration, University of Tartu (Estonia).

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    More about this item

    Keywords

    Central bank; Communication; European central bank;
    All these keywords.

    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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