Does it Pay to Watch Central Bankers’ Lips? The Information Content of ECB Wording

Friedrich Heinemann and Katrin Ullrich ()

Swiss Journal of Economics and Statistics (SJES), 2007, vol. 143, issue II, 155-185

Abstract: In this analysis, the informational content of central bank rhetoric is assessed based on the experience with the ECB since 1999. We construct a wording indicator reflecting the "hawkishness" of monetary rhetorics. For the construction, we develop an objective algorithm representing a learning process of ECB observers. We then integrate this indicator into a standard Taylor-type ordered probit model for the explanation of the interest rate. We show that the wording indicator can improve the model’s fit when added to the standard explanatory variables. However, a model based solely on this indicator performs worse than the baseline.

Keywords: Taylor rule; wording; central bank communication (search for similar items in EconPapers)
JEL-codes: E43 E52 (search for similar items in EconPapers)
Date: 2007
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Citations: View citations in EconPapers (79)

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Working Paper: Does it Pay to Watch Central Bankers' Lips? The Information Content of ECB Wording (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:ses:arsjes:2007-ii-3

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