ECB exchange rate communication

Mar Domenech Palacios, Michael Ehrmann, Massimo Ferrari Minesso, Arnaud Mehl and Fabio Comazzi

No 3229, Working Paper Series from European Central Bank

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

Keywords: central bank communication; exchange rates; high frequency identification; natural language processing (search for similar items in EconPapers)
Date: 2026-05
New Economics Papers: this item is included in nep-ifn and nep-mon
Note: 203739
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20263229

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