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Explaining monetary policy in press conferences

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  • Ehrmann, Michael
  • Fratzscher, Marcel

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 0767.

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Date of creation: Jun 2007
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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: communication; European Central Bank; financial markets; monetary policy; press conference; real-time analysis;

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References

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  1. Helge Berger & Michael Ehrmann & Marcel Fratzscher, 2011. "Monetary Policy in the Media," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 43(4), pages 689-709, 06.
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Citations

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Cited by:
  1. Petra M. Geraats, 2008. "ECB Credibility and Transparency," European Economy - Economic Papers 330, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
  2. Petra Geraats, 2014. "Monetary Policy Transparency," CESifo Working Paper Series 4611, CESifo Group Munich.
  3. Muchlinski, Elke, 2010. "Metaphern, Begriffe und Bedeutungen: Das Beispiel internationale monetäre Institutionen," Discussion Papers 2010/14, Free University Berlin, School of Business & Economics.
  4. Demiralp, Selva & Kara, Hakan & Özlü, Pınar, 2012. "Monetary policy communication in Turkey," European Journal of Political Economy, Elsevier, vol. 28(4), pages 540-556.
  5. 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.
  6. 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, May.
  7. Vergote, Olivier & Puigvert Gutiérrez, Josep Maria, 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.
  8. Lombardo, Giovanni & Vestin, David, 2008. "Welfare implications of Calvo vs. Rotemberg-pricing assumptions," Economics Letters, Elsevier, vol. 100(2), pages 275-279, August.
  9. Rosa, Carlo, 2013. "Market efficiency broadcasted live: ECB code words and euro exchange rates," Journal of Macroeconomics, Elsevier, vol. 38(PB), pages 167-178.
  10. repec:fce:doctra:13-04 is not listed on IDEAS
  11. Pierre L. Siklos, 2013. "The Global Financial Crisis and the Language of Central Banking: Central Bank Guidance in Good Times and in Bad," CAMA Working Papers 2013-58, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  12. 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).
  13. Lars winkelmann & Markus Bibinger & Tobias Linzert, 2013. "ECB monetary policy surprises: identification through cojumps in interest rates," SFB 649 Discussion Papers SFB649DP2013-038, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
  14. Winkelmann, Lars & Bibinger, Markus & Linzert, Tobias, 2013. "ECB monetary policy surprises: identification through cojumps in interest rates," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79721, Verein für Socialpolitik / German Economic Association.
  15. Man-Keung Tang & Xiangrong Yu, 2011. "Communication of Central Bank Thinking and Inflation Dynamics," IMF Working Papers 11/209, International Monetary Fund.

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