Does ECB Communication Help in Predicting its Interest Rate Decisions?

David-Jan Jansen, Jakob de Haan and Jakob de Haan
Authors registered in the RePEc Author Service: Jakob de Haan

No 1804, CESifo Working Paper Series from CESifo

Abstract: We examine the usefulness of communication by the European Central Bank for predicting its interest rate decisions. We use ordered probit models based on the Taylor rule which we estimate using statements by ECB officials as well as macroeconomic variables. Statements by ECB officials on the main refinancing rate and future inflation are significantly related to ECB decisions. However, an out-of-sample evaluation shows that communication-based models do not outperform models based on macroeconomic data in predicting decisions. Both sets of models only accurately predict decisions to leave interest rates unchanged.

Keywords: ECB communication; interest rate decision; Taylor rule; ordered probit models (search for similar items in EconPapers)
Date: 2006
New Economics Papers: this item is included in nep-cba, nep-dcm, nep-eec, nep-fmk, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_1804

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