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Communication by Central Bank Committee Members: Different Strategies, Same Effectiveness?

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  • MICHAEL EHRMANN
  • MARCEL FRATZSCHER

Abstract

The paper assesses the communication strategies of the Federal Reserve, the Bank of England, and the European Central Bank and their effectiveness. We find that the effectiveness of communication is not independent from the decision‐making process. The paper shows that the Federal Reserve has been pursuing a highly individualistic communication strategy amid a collegial approach to decision making, while the Bank of England is using a collegial communication strategy and highly individualistic decision making. The European Central Bank (ECB) has chosen a collegial approach both in its communication and in its decision making. Assessing these strategies, we find that predictability of policy decisions and the responsiveness of financial markets to communication are equally good for the Federal Reserve and the ECB. This suggests that there may not be a single best approach to designing a central bank communication strategy.

Suggested Citation

  • Michael Ehrmann & Marcel Fratzscher, 2007. "Communication by Central Bank Committee Members: Different Strategies, Same Effectiveness?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(2‐3), pages 509-541, March.
  • Handle: RePEc:wly:jmoncb:v:39:y:2007:i:2-3:p:509-541
    DOI: 10.1111/j.0022-2879.2007.00034.x
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