The value of understanding central bank communication

Renaud Beaupain and Alexandre Girard

Economic Modelling, 2020, vol. 85, issue C, 154-165

Abstract: This paper examines whether the communication of a central bank can complement its actions to coordinate market expectations and ultimately steer long-term interest rates. More specifically, we propose a measure of common understanding between the central bank and market participants and we assess how it alters the sovereign yield spreads of a sample of core and distressed countries in the euro area. We build a latent semantic analysis of the official transcripts of the press conferences that the European Central Bank holds at the end of each reserve maintenance period. We report empirical evidence supporting the importance of communication for implementing monetary policy decisions. Specifically, we show that the communication of the ECB was altered by the announcement of unconventional measures and that it significantly impacted sovereign spreads in the euro area.

Keywords: Central bank communication; Sovereign bond yield spreads; Monetary policy; Latent semantic analysis (search for similar items in EconPapers)
JEL-codes: E43 E52 E58 G01 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S026499931930361X
Full text for ScienceDirect subscribers only

Related works:
Working Paper: The value of understanding central bank communication (2020)
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:eee:ecmode:v:85:y:2020:i:c:p:154-165

DOI: 10.1016/j.econmod.2019.05.013

Access Statistics for this article

Economic Modelling is currently edited by S. Hall and P. Pauly

More articles in Economic Modelling from Elsevier
Bibliographic data for series maintained by Catherine Liu ().