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Explaining Monetary Policy in Press Conferences

Author Info

Listed author(s):
  • Michael Ehrmann

    (European Central Bank)

  • Marcel Fratzscher

    (European Central Bank)

Abstract

The question of 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 have on average had larger effects on financial markets than the corresponding policy decisions, with lower effects on volatility. Moreover, the Q&A part of the press conference fulfills a clarification role, in particular during periods of large macroeconomic uncertainty.

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Article provided by International Journal of Central Banking in its journal International Journal of Central Banking.

Volume (Year): 5 (2009)
Issue (Month): 2 (June)
Pages: 42-84

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Handle: RePEc:ijc:ijcjou:y:2009:q:2:a:2
Contact details of provider: Web page: http://www.ijcb.org/

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Find related papers by JEL classification:
  • 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
  • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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