Non-standard monetary policy and ECB communication: Confusion or predictability?

Quentin Bro de Comères (quentin.bro.de.comeres@univ-poitiers.fr), Cornel Oros (cornel.oros@univ-poitiers.fr), Marc Pourroy (marc.pourroy@univ-poitiers.fr), Léonore Raguideau-Hannotin (lraguideau@hotmail.com) and Anne-Gaël Vaubourg (anne.gael.vaubourg@univ-poitiers.fr)
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Quentin Bro de Comères: LéP [Poitiers] - Laboratoire d'économie de Poitiers - UP - Université de Poitiers = University of Poitiers
Cornel Oros: LéP [Poitiers] - Laboratoire d'économie de Poitiers - UP - Université de Poitiers = University of Poitiers
Marc Pourroy: LéP [Poitiers] - Laboratoire d'économie de Poitiers - UP - Université de Poitiers = University of Poitiers
Léonore Raguideau-Hannotin: LéP [Poitiers] - Laboratoire d'économie de Poitiers - UP - Université de Poitiers = University of Poitiers
Anne-Gaël Vaubourg: LéP [Poitiers] - Laboratoire d'économie de Poitiers - UP - Université de Poitiers = University of Poitiers

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Abstract: Using a dataset of 273 press releases and introductory statements over the period 1999-2020, we investigate how the communication of the European Central Bank (ECB) influences the ability of market participants to predict its monetary decisions. We build four new indicators of communication intensity and frequency and measure predictability by decomposing the surprises on the variation of asset prices around monetary announcements into a "target" –which captures the standard dimension of monetary policy surprises– a "path" factor –which corresponds to the forward guidance dimension of monetary surprises– and a QE factor –which accounts for their quantitative easing dimension. Our findings reveal that the intensity and frequency of ECB communication reduce the surprise of market participants regarding non-standard dimensions of monetary policy. Moreover, the improvement of the predictability of monetary decisions is not achieved at the expense of greater confusion over standard monetary decisions. Additionally, the reduction in surprises operates through the information channel, by which monetary policy announcements transfer information about economic fundamentals from the central bank to market participants.

Keywords: Monetary policy; Communication; Transparency; Predictability; Surprise (search for similar items in EconPapers)
Date: 2025-02
Note: View the original document on HAL open archive server: https://hal.science/hal-04981018v1
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Published in Journal of International Money and Finance, 2025, 151, pp.103236. ⟨10.1016/j.jimonfin.2024.103236⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04981018

DOI: 10.1016/j.jimonfin.2024.103236

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