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Do ECB's Statements Steer Short-Term and Long-Term Interest Rates in the Euro Zone ?

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Author Info
Marie Musard-Gies () (LEO - Laboratoire d'économie d'Orleans - CNRS : UMR6221 - Université d'Orléans)

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Abstract

In this paper, we aim at testing whether press conferences held after the meeting of the ECB's monetary policy council steer market short- and long-term interest rates in the euro zone. To meet this goal, we "codify" the statements according to whether they are neutral, hawkish, or dovish. We show, using a principal components analysis of euro-zone (short- and long-term) interest rates that the euro-zone's market rates, react significantly to the bias in statements, and more particularly to changes in statements from one meeting to the next. If we study separately the reaction of short- and long-term interest rates to change in statements, the short end of the yield curve reacts more sharply to statements than the long segment. We show that the effect of statements peaks on interest rates with a maturity of six or twelve months and is smaller for the longer maturities. Using non-parametric tests confirms our previous results.

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Paper provided by HAL in its series Working Papers with number halshs-00007692_v1.

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Date of creation: 06 Jan 2006
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Handle: RePEc:hal:wpaper:halshs-00007692_v1

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Related research
Keywords: Communication ; Transparency ; Monetary Policy ; European Central Bank.;

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. D. Jansen & J. de Haan, 2003. "Statements of ECB Officials and their Effect on the Level and Volatility of the Euro-Dollar Exchange Rate," WO Research Memoranda (discontinued) 726, Netherlands Central Bank, Research Department. [Downloadable!]
    Other versions:
  2. Refet Gurkaynak & Brian Sack & Eric Swanson, 2005. "Do Actions Speak Louder than Words? The Response of Asset Prices to Monetary Policy Actions and Statements," Macroeconomics 0504013, EconWPA. [Downloadable!]
    Other versions:
  3. William Poole & Robert H & Rasche & Daniel L. Thornton, 2002. "Market anticipations of monetary policy actions," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 65-94. [Downloadable!]
  4. Frederic S. Mishkin, 2004. "Can Central Bank Transparency Go Too Far?," NBER Working Papers 10829, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  5. William Poole & Robert Rasche, 2000. "Perfecting the Market's Knowledge of Monetary Policy," Journal of Financial Services Research, Springer, vol. 18(2), pages 255-298, December. [Downloadable!] (restricted)
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  6. Kerstin Bernoth & Jürgen von Hagen, 2004. "The Euribor Futures Market: Efficiency and the Impact of ECB Policy Announcements," International Finance, Blackwell Publishing, vol. 7(1), pages 1-24, 03. [Downloadable!] (restricted)
  7. Ben S. Bernanke & Vincent R. Reinhart & Brian P. Sack, 2004. "Monetary policy alternatives at the zero bound: an empirical assessment," Finance and Economics Discussion Series 2004-48, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
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  8. Stephen Morris & Hyun Song Shin, 2002. "Social Value of Public Information," American Economic Review, American Economic Association, vol. 92(5), pages 1521-1534, December. [Downloadable!]
  9. Marcel Fratzscher, 2004. "Communication and exchange rate policy," Working Paper Series 363, European Central Bank. [Downloadable!]
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  10. Eric T. Swanson, 2004. "Federal Reserve transparency and financial market forecasts of short-term interest rates," Finance and Economics Discussion Series 2004-06, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
  11. Donald L. Kohn & Brian P. Sack, 2003. "Central bank talk: does it matter and why?," Finance and Economics Discussion Series 2003-55, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
  12. Stephen Morris & Jeffery D. Amato & Hyun Song Shin, 2004. "Communication and Monetary Policy," Yale School of Management Working Papers ysm345, Yale School of Management. [Downloadable!]
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  13. Gerlach, Stefan, 2004. "Interest Rate Setting by the ECB: Words and Deeds," CEPR Discussion Papers 4775, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  14. Petra M. Geraats, 2002. "Central Bank Transparency," Economic Journal, Royal Economic Society, vol. 112(483), pages 532-565, November. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  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," NBER Working Papers 13932, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  2. Claus Brand & Daniel Buncic & Jarkko Turunen, 2008. "The Impact of ECB Monetary Policy Decisions and Communication on the Yield Curve," Discussion Papers 2008-11, School of Economics, The University of New South Wales. [Downloadable!]
    Other versions:
  3. Carlo Rosa & Giovanni Verga, 2006. "The Impact of Central Bank Announcements on Asset Prices in Real Time: Testing the Efficiency of the Euribor Futures Market," CEP Discussion Papers dp0764, Centre for Economic Performance, LSE. [Downloadable!]
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