Communication and decision-making by central bank committees - different strategies, same effectiveness?

Michael Ehrmann () and Marcel Fratzscher ()

No 488, Working Paper Series from European Central Bank

Abstract: The paper assesses the communication strategies of the Federal Reserve, the Bank of England and the European Central Bank and their effectiveness. We find that the effectiveness of communication is not independent from the decisionmaking process in the committee. The paper shows that the Federal Reserve has been pursuing a rather individualistic communication strategy amid a collegial approach to decision-making, while the Bank of England is using a collegial communication strategy and highly individualistic decision-making. The ECB has chosen a collegial approach both in its communication and in its decisionmaking. Assessing these strategies, we find that predictability of policy decisions and the responsiveness of financial markets to communication are equally good for the Federal Reserve and the ECB. This suggests that there may not be a single best approach to designing a central bank communication and decisionmaking strategy.

Keywords: Communication; monetary policy; committee; effectiveness; strategies; Federal Reserve; Bank of England; European Central Bank. (search for similar items in EconPapers)
JEL-codes: E43 E52 E58 G12 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-eec, nep-fin, nep-fmk, nep-mac and nep-mon
Date: 2005-05
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