The Importance of the Wording of the ECB
AbstractThis paper analyses the ECB communication, focusing in particular on its transparency dimension. We posit that if the ECB is transparent about its future policy decisions, then we should be able to forecast fairly well its future interest rate setting behaviour. We find that the predicting ability of the European monetary authority's words, is similar to the one implied by market-based measures of monetary policy expectations. Moreover, the ECB's wording provides complementary, rather than substitute, information with respect to economic and monetary variables.
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Bibliographic InfoPaper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp0694.
Date of creation: Jun 2005
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ECB communication; transparency; monetary policy forecast; empirical reaction function; Euribor rate curve;
Find related papers by JEL classification:
- E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-12-01 (All new papers)
- NEP-CBA-2006-02-07 (Central Banking)
- NEP-EEC-2005-12-05 (European Economics)
- NEP-FIN-2005-12-01 (Finance)
- NEP-MAC-2005-12-07 (Macroeconomics)
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- Friedrich Heinemann & Katrin Ullrich, 2007.
"Does it Pay to Watch Central Bankers’ Lips? The Information Content of ECB Wording,"
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- Heinemann, Friedrich & Ullrich, Katrin, 2005. "Does it Pay to Watch Central Bankers' Lips? The Information Content of ECB Wording," ZEW Discussion Papers 05-70, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
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- Claus Brand & Daniel Buncic & Jarkko Turunen, 2008. "The Impact of ECB Monetary Policy Decisions and Communication on the Yield Curve," Discussion Papers 2008-11, School of Economics, The University of New South Wales.
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