Central Bank Communication and Interest Rates: The Case of the Czech National Bank
We examine how written and oral central bank communications affect the level and volatility of interest rates. We use detailed daily data on the Czech central bank’s communication in 2007–2012. We find that financial markets respond to central bank communication. Short-term interest rates rise if the bank communicates that economic conditions are good. The results suggest that written communication, but not oral communication, decreases the volatility of both short-term and long-term interest rates. The timing of communication has a key role, as comments made closer to the monetary policy meeting have a bigger calming effect on the markets. All in all, our results point to the importance of well-designed communication for reducing noise in the financial markets.
Volume (Year): 63 (2013)
Issue (Month): 5 (November)
|Contact details of provider:|| Postal: |
Phone: +420 2 222112330
Fax: +420 2 22112304
Web page: http://ies.fsv.cuni.cz/Email:
More information through EDIRC
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.:
- Böhm, Jiří & Král, Petr & Saxa, Branislav, 2012. "The Czech National Bank's monetary policy in the media," European Journal of Political Economy, Elsevier, vol. 28(3), pages 341-357.
- Zakoian, Jean-Michel, 1994. "Threshold heteroskedastic models," Journal of Economic Dynamics and Control, Elsevier, vol. 18(5), pages 931-955, September.
- Petra Geraats, 2009.
"Trends in Monetary Policy Transparency,"
CESifo Working Paper Series
2584, CESifo Group Munich.
- Ehrmann, Michael & Fratzscher, Marcel, 2005.
"The timing of central bank communication,"
Working Paper Series
0565, European Central Bank.
- Michael Ehrmann & Marcel Fratzscher, 2009.
"Purdah-On the Rationale for Central Bank Silence around Policy Meetings,"
Journal of Money, Credit and Banking,
Blackwell Publishing, vol. 41(2-3), pages 517-528, 03.
- Ehrmann, Michael & Fratzscher, Marcel, 2008. "Purdah: on the rationale for central bank silence around policy meetings," Working Paper Series 0868, European Central Bank.
- Jan Filáček & Branislav Saxa, 2012. "Central Bank Forecasts as a Coordination Device: Evidence from the Czech Republic," Czech Economic Review, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, vol. 6(3), pages 244-264, October.
- Rozkrut, Marek & Rybinski, Krzysztof & Sztaba, Lucyna & Szwaja, Radoslaw, 2007. "Quest for central bank communication: Does it pay to be "talkative"?," European Journal of Political Economy, Elsevier, vol. 23(1), pages 176-206, March.
- Nelson, Daniel B, 1991. "Conditional Heteroskedasticity in Asset Returns: A New Approach," Econometrica, Econometric Society, vol. 59(2), pages 347-70, March.
- Nergiz Dincer & Barry Eichengreen, 2009. "Central Bank Transparency: Causes, Consequences and Updates," NBER Working Papers 14791, National Bureau of Economic Research, Inc.
When requesting a correction, please mention this item's handle: RePEc:fau:fauart:v:63:y:2013:i:5:p:454-464. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Lenka Herrmannova)
If references are entirely missing, you can add them using this form.