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Explaining monetary policy in press conferences

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Abstract

The question how best to communicate monetary policy decisions remains a highly topical issue among central banks. Focusing on the experience of the European Central Bank, this paper studies how explanations of monetary policy decisions at press conferences are perceived by financial markets. The empirical findings show that ECB press conferences provide substantial additional information to financial markets beyond that contained in the monetary policy decisions, and that the information content is closely linked to the characteristics of the decisions. Press conferences indeed have on average had larger effects on financial markets than even the corresponding policy decisions, and with lower effects on volatility. Moreover, the Q&A part of the press conference fulfils a clarification role about the economic outlook, in particular during periods of large macroeconomic uncertainty. JEL Classification: E52, E58, G14.

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Bibliographic Info

Paper provided by European Central Bank in its series Working Paper Series with number 767.

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Length: 41 pages
Date of creation: Jun 2007
Date of revision:
Handle: RePEc:ecb:ecbwps:20070767

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Postal: Press and Information Division, European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany
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Keywords: Monetary policy; financial markets; real-time analysis; press conference; communication; European Central Bank.;

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References

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Citations

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Cited by:
  1. Alan S. Blinder & Michael Ehrmann & Marcel Fratzscher & Jakob de Haan & David-Jan Jansen, 2008. "Central Bank Communication and Monetary Policy: A Survey of Theory and Evidence," DNB Working Papers 170, Netherlands Central Bank, Research Department.
  2. Muchlinski, Elke, 2010. "Metaphern, Begriffe und Bedeutungen: Das Beispiel internationale monetäre Institutionen," Discussion Papers 2010/14, Free University Berlin, School of Business & Economics.
  3. Giovanni Lombardo & David Vestin, 2007. "Welfare implications of Calvo vs. Rotemberg pricing assumptions," Working Paper Series 770, European Central Bank.
  4. repec:fce:doctra:13-04 is not listed on IDEAS
  5. Man-Keung Tang & Xiangrong Yu, 2011. "Communication of Central Bank Thinking and Inflation Dynamics," IMF Working Papers 11/209, International Monetary Fund.
  6. Paul Hubert, 2013. "ECB projections as a tool for understanding policy decisions," Documents de Travail de l'OFCE 2013-04, Observatoire Francais des Conjonctures Economiques (OFCE).
  7. Petra M. Geraats, 2008. "ECB Credibility and Transparency," European Economy - Economic Papers 330, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
  8. Bank for International Settlements, 2009. "Communication of monetary policy decisions by central banks: what is revealed and why," BIS Papers, Bank for International Settlements, number 47, March.
  9. Olivier Vergote & Josep Maria Puigvert Gutiérrez, 2011. "Interest rate expectations and uncertainty during ECB governing council days: evidence from intraday implied densities of 3-month Euribor," Working Paper Series 1391, European Central Bank.

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