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ECB exchange rate communication

Author

Listed:
  • Domenech Palacios, Mar
  • Ehrmann, Michael
  • Ferrari Minesso, Massimo
  • Mehl, Arnaud
  • Comazzi, Fabio

Abstract

We revisit the debate on the effectiveness of central bank communication on exchange rates, contrasting a skeptical view, which holds that communication neither moves exchange rates nor influences them in the desired direction, with an optimistic view that it does. Using nearly 100 official ECB statements on exchange rates made during its monetary policy press conferences since 2002, we show that the ECB tends to mention the exchange rate when the real effective exchange rate deviates from its equilibrium value, whereas journalists’ questions are mainly responsive to the nominal exchange rate. Studying the effects of these mentions, our findings by and large support the skeptical view: after controlling for monetary policy shocks, exchange rate communication has limited immediate effects on the euro exchange rate, which fade quickly. Effectiveness is particularly limited when interest rates are at their effective lower bound. JEL Classification: E52, E58, F31, O24

Suggested Citation

  • Domenech Palacios, Mar & Ehrmann, Michael & Ferrari Minesso, Massimo & Mehl, Arnaud & Comazzi, Fabio, 2026. "ECB exchange rate communication," Working Paper Series 3229, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:20263229
    Note: 203739
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    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
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • O24 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy

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