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An Assessment of the Consistency of ECB Communication using Wordscores

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  • David-Jan Jansen
  • Jakob de Haan

Abstract

Wordscores uses word frequencies to extract information from texts with known policy positions. Wordscores uses this information to estimate the unknown policy positions of so - called virgin texts. We apply Wordscores to the ECB President's introductory statements following Governing Council meetings. We code policy positions of statements from the first three years of the Economic and Monetary Union (our reference texts) using various indicators of ECB communication as well as actual rate decisions. Treating introductory statements from 2002 to July 2009 as virgin texts, Wordscores is able to present a fairly accurate picture of ECB policy decisions during that period. The results also suggest changes in ECB communications occurred: using more introductory statements as reference texts improves the match between estimated positions and actual policy. Overall, we would characterize ECB communication during the first decade of EMU as internally consistent. At the same time, communication was flexible enough to adapt to changed circumstances.

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File URL: http://www.dnb.nl/binaries/259_tcm46-238169.pdf
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Bibliographic Info

Paper provided by Netherlands Central Bank, Research Department in its series DNB Working Papers with number 259.

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Date of creation: Aug 2010
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Handle: RePEc:dnb:dnbwpp:259

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Web page: http://www.dnb.nl/en/
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Related research

Keywords: central bank communication; ECB; consistency; content analysis;

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Cited by:
  1. Allard, Julien & Catenaro, Marco & Vidal, Jean-Pierre & Wolswijk, Guido, 2013. "Central bank communication on fiscal policy," European Journal of Political Economy, Elsevier, vol. 30(C), pages 1-14.
  2. Robert S. Chirinko & Christopher Curran, 2013. "Greenspan Shrugs: Central Bank Communication, Formal Pronouncements and Bond Market Volatility," CESifo Working Paper Series 4236, CESifo Group Munich.

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