This paper analyses the ECB communication, focusing in particular on its transparencydimension. We posit that if the ECB is transparent about its future policy decisions, then weshould be able to forecast fairly well its future interest rate setting behaviour. We find thatthe predicting ability of the European monetary authority's words, is similar to the oneimplied by market-based measures of monetary policy expectations. Moreover, the ECB'swording provides complementary, rather than substitute, information with respect toeconomic and monetary variables.
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Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number
dp0694.
Find related papers by JEL classification: E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Determination of Interest Rates; Term Structure of Interest Rates 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
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