The ECB’s monetary pillar after the financial crisis

We apply a structural topic model (STM) to analyze European Central Bank (ECB) communication regarding the monetary pillar of its monetary policy strategy. We do so by quantifying the transcripts of the ECB Presidents introductory statements at the press conferences that accompany the regular meetings of the ECB Governing Council. Our evidence shows that, within its monetary pillar, the ECB has gradually shifted its focus away from a genuine monetary analysis towards monitoring the stability of the European financial system. We go on to augment a standard Taylor rule by quantitative indicators obtained from the STM to assess whether the monetary pillar in general, and the shift in focus in particular, has had a measurable impact on the ECBs monetary policy stance. We find weak evidence that the monetary analysis has had a bearing on the ECBs interest rate setting in the early years of the ECB's existence, but this influence completely disappears in the latter years of the sample. We also find that after the financial crisis, the monetary policy response to its financial sentiment communication has been accommodative rather than "leaning against the wind".