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Have monetary data releases helped markets to predict the interest rate decisions of the European Central Bank?

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  • Jung, Alexander

Abstract

This paper examines whether monetary data releases by the European Central Bank (ECB) have provided markets with additional clues about the future course of its monetary policy. It conducts a novel econometric approach based on a combination of an Ordered Probit model explaining future policy rate changes (sample 2000 to 2014) and the Vuong test for model selection. Overall, our results suggest that information contained in press releases on monetary developments for the euro area has helped markets in forming their expectations on the next monetary policy decision. JEL Classification: C34, D78, E52, E58

Suggested Citation

  • Jung, Alexander, 2016. "Have monetary data releases helped markets to predict the interest rate decisions of the European Central Bank?," Working Paper Series 1926, European Central Bank.
  • Handle: RePEc:ecb:ecbwps:20161926
    Note: 2106626
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    File URL: https://www.ecb.europa.eu//pub/pdf/scpwps/ecbwp1926.en.pdf
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    References listed on IDEAS

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    1. repec:vls:finstu:v:20:y:2016:i:4:p:54-68 is not listed on IDEAS

    More about this item

    Keywords

    communication; monetary analysis; predictability; Probit model; Vuong test;

    JEL classification:

    • C34 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Truncated and Censored Models; Switching Regression Models
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • 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

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