IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

Explaining Monetary Policy in Press Conferences

Author Info

  • 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.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.ijcb.org/journal/ijcb09q2a2.pdf
Download Restriction: no
File URL: http://www.ijcb.org/journal/ijcb09q2a2.htm
Download Restriction: no

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

as
in new window

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

Keywords:

Other versions of this item:

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

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.:

as in new window
  1. Friedrich Heinemann & Katrin Ullrich, 2007. "Does it Pay to Watch Central Bankers’ Lips? The Information Content of ECB Wording," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 143(II), pages 155-185, June.
  2. Ben Bernanke & Kenneth N. Kuttner, 2003. "What explains the stock market's reaction to Federal Reserve policy?," Proceedings, Federal Reserve Bank of San Francisco, issue Mar.
  3. Andersson, Malin & Dillen, Hans & Sellin, Peter, 2006. "Monetary policy signaling and movements in the term structure of interest rates," Journal of Monetary Economics, Elsevier, vol. 53(8), pages 1815-1855, November.
  4. Hartmann, Philipp & Manna, Michele & Manzanares, Andrés, 2001. "The microstructure of the euro money market," Working Paper Series 0080, European Central Bank.
  5. Helge Berger & Jakob de Haan & Jan‐Egbert Sturm, 2011. "Does money matter in the ECB strategy? New evidence based on ECB communication," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 16(1), pages 16-31, 01.
  6. Daniel L. Thornton, 1998. "Tests of the market's reaction to federal funds rate target changes," Review, Federal Reserve Bank of St. Louis, issue Nov, pages 25-36.
  7. 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.
  8. Guthrie, Graeme & Wright, Julian, 2000. "Open mouth operations," Journal of Monetary Economics, Elsevier, vol. 46(2), pages 489-516, October.
  9. Roberto Rigobon & Brian P. Sack, 2002. "The Impact of Monetary Policy on Asset Prices," NBER Working Papers 8794, National Bureau of Economic Research, Inc.
  10. Gurkaynak, Refet S & Sack, Brian & Swanson, Eric T, 2005. "Do Actions Speak Louder Than Words? The Response of Asset Prices to Monetary Policy Actions and Statements," MPRA Paper 820, University Library of Munich, Germany.
  11. Gropp, Reint & Kadareja, Arjan, 2006. "Stale information, shocks and volatility," Working Paper Series 0686, European Central Bank.
  12. 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.).
  13. Magnus Andersson & Lars Jul Overby & Szabolcs Sebestyén, 2009. "Which News Moves the Euro Area Bond Market?," German Economic Review, Verein für Socialpolitik, vol. 10, pages 1-31, 02.
  14. Vítor Gaspar & Gabriel Perez-Quiros & Jorge Sicilia, 2001. "The ECB monetary policy strategy and the money market," Working Papers 47, Oesterreichische Nationalbank (Austrian Central Bank).
  15. Petra M. Geraats, 2002. "Central Bank Transparency," Economic Journal, Royal Economic Society, vol. 112(483), pages 532-565, November.
  16. Rachel Reeves & Michael Sawicki, 2005. "Do financial markets react to Bank of England communication?," Discussion Papers 15, Monetary Policy Committee Unit, Bank of England.
  17. John H. Cochrane & Monika Piazzesi, 2002. "The Fed and Interest Rates: A High-Frequency Identification," NBER Working Papers 8839, National Bureau of Economic Research, Inc.
  18. Berger, Helge & Ehrmann, Michael & Fratzscher, Marcel, 2006. "Monetary policy in the media," Working Paper Series 0679, European Central Bank.
  19. Ehrmann, Michael & Fratzscher, Marcel, 2005. "Communication and decision-making by central bank committees: different strategies, same effectiveness?," Working Paper Series 0488, European Central Bank.
  20. Jakob Haan & Fabian Amtenbrink & Sandra Waller, 2004. "The Transparency and Credibility of the European Central Bank," Journal of Common Market Studies, Wiley Blackwell, vol. 42(4), pages 775-794, November.
  21. Alan S. Blinder, 1999. "Central Banking in Theory and Practice," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262522608, June.
  22. Andersson, Magnus, 2007. "Using intraday data to gauge financial market responses to Fed and ECB monetary policy decisions," Working Paper Series 0726, European Central Bank.
  23. Rosa, Carlo & Verga, Giovanni, 2007. "On the consistency and effectiveness of central bank communication: Evidence from the ECB," European Journal of Political Economy, Elsevier, vol. 23(1), pages 146-175, March.
  24. Ehrmann, Michael & Fratzscher, Marcel, 2004. "Taking stock: monetary policy transmission to equity markets," Working Paper Series 0354, European Central Bank.
  25. Ehrmann, Michael & Fratzscher, Marcel, 2003. "Monetary Policy Announcements and Money Markets: A Transatlantic Perspective," International Finance, Wiley Blackwell, vol. 6(3), pages 309-28, Winter.
Full references (including those not matched with items on IDEAS)

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

as in new window


Cited by:
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Access and download statistics

When requesting a correction, please mention this item's handle: RePEc:ijc:ijcjou:y:2009:q:2:a:2. 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: (Timo Laurmaa)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.