ECB monetary policy communication: does it move euro area yields?

Linas Jurkšas () and Rokas Kaminskas ()
Additional contact information
Linas Jurkšas: Bank of Lithuania, Vilnius University
Rokas Kaminskas: Bank of Lithuania, ISM University of Management and Economics

No 29, Bank of Lithuania Discussion Paper Series from Bank of Lithuania

Abstract: In this paper we examine multiple dimensions of ECB monetary policy communication by identifying its sentiment and relation with the economic environment and financial markets. We quantify communication sentiment using transcripts from official ECB communication events – press conferences, accounts and Executive Board speeches – as well as media reactions that highlight the key messages of those events. Importantly, we create unique lexicons for both of those communication types. We find that the overall trends in the sentiment indices for the analysed communication events closely resemble the movements of monetary policy stance as well as macroeconomic indicators in the euro area, both before and after the COVID-19 shock period. The communication tone generally shifts in advance of actual monetary policy actions. Using regression analysis, we find some expected, statistically significant effects of press confer-ence sentiment on bank stock prices (information-type shock) and identify the impact of Executive Board speeches on euro area fiscal borrowing costs (short-term OIS rates). Fragmentation issues among euro area member states do not seem to be negatively affected by the sentiments of the ECB’s communication. Still, policy makers should be aware that the tone of their communication events is likely to affect particular financial markets.

Keywords: ECB; monetary policy; communication; sentiment analysis; euro area; financial markets. (search for similar items in EconPapers)
JEL-codes: C80 E43 E44 E58 G14 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2023-04-14
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.lb.lt/uploads/publications/docs/41112_ ... e496bcf378f4389c.pdf Full text (application/pdf)
Our link check indicates that this URL is bad, the error code is: 403 Forbidden

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:lie:dpaper:29

Access Statistics for this paper

More papers in Bank of Lithuania Discussion Paper Series from Bank of Lithuania Bank of Lithuania Gedimino pr. 6, LT-01103 Vilnius, Lithuania. Contact information at EDIRC.
Bibliographic data for series maintained by Aurelija Proskute ().