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Is a Word to the Wise Indeed Enough? ECB Statements and the Predictibility of Interest Rate Decisions

David-Jan Jansen and Jakob de Haan ()

DNB Working Papers from Netherlands Central Bank, Research Department

Abstract: We show that comments by euro area central bankers contain information on future ECB interest rate decisions, but that the comments mainly reflect recent developments in macroeconomic variables. Furthermore, models using only communication variables are outperformed by straightforward Taylor rule models. During the first years of the European Economic and Monetary Union, comments by ECB Executive Board members and high-level Bundesbank policy-makers were more informative than comments by national central bank presidents. We also find that differences of opinion were informative when they concerned the outlook for economic growth. Finally, our results suggest that the ECB used communication especially to signal interest rate increases.

Keywords: central bank communication; interest rate decisions; ECB; Taylor rule; ordered probit models (search for similar items in EconPapers)
JEL-codes: E43 E52 E58 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-dcm, nep-eec, nep-fmk, nep-mac and nep-mon
Date: 2005-12
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Related works:
Working Paper: Is a word to the wise indeed enough? ECB statements and the predictability of interest rate decisions (2007) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:dnb:dnbwpp:075

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