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Communication of ECB Governing Council members: do they speak in one voice?

Author

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  • Linas JurkÅ¡as

    (Bank of Lithuania, ISM University of Management and Economics)

  • Rokas Kaminskas

    (Bank of Lithuania, ISM University of Management and Economics)

Abstract

The goal of this paper is to determine the heterogeneity in communication among the ECB Governing Council members, employing the GPT language model, and assess its impact on financial markets with high-frequency data since 2014. Our findings uncover trends in sentiments and topics in line with economic developments and similar studies. We highlight a marked divergence between hawkish and dovish members. Using regression analysis, we demonstrate that the communication from the Governing Council members significantly influences various euro area asset classes, particularly Italian sovereign bonds. These effects are consistently significant across different periods. Our study also highlights specific topics that exert a more pronounced influence on market dynamics, notably unconventional monetary policy since 2014 and, more recently, interest rate discussions. Hawkish communication is observed to have a more substantial effect on sovereign bond yields. Furthermore, speeches by Executive Board members and the Governors of Germany, France and Austria are found to have the most significant overall impact on euro area markets.

Suggested Citation

  • Linas JurkÅ¡as & Rokas Kaminskas, 2024. "Communication of ECB Governing Council members: do they speak in one voice?," Bank of Lithuania Discussion Paper Series 39, Bank of Lithuania.
    • Handle: RePEc:lie:dpaper:39
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    More about this item

    Keywords

    ECB; monetary policy; communication; sentiment analysis; euro area; financial markets.;
    All these keywords.

    JEL classification:

    • C80 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - General
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • 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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