The European Central Bank’s monetary pillar after the financial crisis

T. Philipp Dybowski and Bernd Kempa

Journal of Banking & Finance, 2020, vol. 121, issue C

Abstract: We apply a structural topic model (STM) to analyze European Central Bank (ECB) communication regarding the monetary pillar of its monetary policy strategy. We do so by quantifying the transcripts of the ECB President’s introductory statements at the press conferences that accompany the regular meetings of the ECB Governing Council. Our evidence shows that, within its monetary pillar, the ECB has gradually shifted its focus away from a genuine monetary analysis towards monitoring the stability of the European financial system. We go on to augment a standard Taylor rule by quantitative indicators obtained from the STM to assess whether the monetary pillar in general, and the shift in focus in particular, has had a measurable impact on the ECB’s monetary policy stance. We find that the monetary analysis has had a bearing on the interest rate setting in the early years of the ECB’s existence, but this influence completely disappears in the latter years of the sample. Furthermore, we find no evidence that financial stability considerations in the ECB communication have influenced interest rate decisions either before or after the financial crisis.

Keywords: European Central Bank; Monetary policy; Central bank communication; Topic models (search for similar items in EconPapers)
JEL-codes: C11 E52 E58 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0378426620302272
Full text for ScienceDirect subscribers only

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:eee:jbfina:v:121:y:2020:i:c:s0378426620302272

DOI: 10.1016/j.jbankfin.2020.105965

Access Statistics for this article

Journal of Banking & Finance is currently edited by Ike Mathur

More articles in Journal of Banking & Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().