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It’s not only WHAT is said, it’s also WHO the speaker is. Evaluating the effectiveness of central bank communication

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Author Info
Marek Rozkrut

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Abstract

On the basis of a unique database of policy makers’ comments, we find that central bank communication does influence behavior of financial markets. This effect is asymmetric and depends on the contents and direction of the statements. Moreover, we investigate whether individual characteristics of MPC members may influence their ability to affect the asset prices. We find that market participants are most vigilant to the comments made by policy makers who are relatively reticent, usually win voting and match their words with deeds. Moreover, the impact of statements on financial market behavior depends on whether a speaker represents a hawkish, dovish or neutral faction within the committee. Finally, we provide evidence that central bank communication affects the predictability of monetary policy decisions.

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Publisher Info
Paper provided by National Bank of Poland, Economic Institute in its series National Bank of Poland Working Papers with number 47.

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Length: 40
Date of creation: Apr 2008
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Handle: RePEc:nbp:nbpmis:47

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Related research
Keywords: Monetary policy; Central bank; Transparency; Communication;

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Find related papers by JEL classification:
C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions
E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Determination of Interest Rates; Term Structure of Interest Rates
E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
G12 - Financial Economics - - General Financial Markets - - - Asset Pricing

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  20. Stephen Morris & Hyun Song Shin & Hui Tong, 2006. "Social Value of Public Information: Morris and Shin (2002) Is Actually Pro-Transparency, Not Con: Reply," American Economic Review, American Economic Association, vol. 96(1), pages 453-455, March. [Downloadable!]
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  23. Heinemann, Friedrich & Ullrich, Katrin, 2005. "Does it Pay to Watch Central Bankers? Lips? The Information Content of ECB Wording," ZEW Discussion Papers 05-70, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
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    Other versions:
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