The Role of ECB Communication in Guiding Markets

Marc Anderes (), Alexander Rathke (), Sina Streicher () and Jan-Egbert Sturm
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Marc Anderes: KOF Swiss Economic Institute, ETH Zurich, Switzerland
Alexander Rathke: KOF Swiss Economic Institute, ETH Zurich, Switzerland
Sina Streicher: KOF Swiss Economic Institute, ETH Zurich, Switzerland

No 19-446, KOF Working papers from KOF Swiss Economic Institute, ETH Zurich

Abstract: Economists and central bankers nowadays believe that forward guidance has become more important in a world in which key interest rates have hit their effective lower bounds (ELB). In case of the European Central Bank (ECB), this should have increased the informational content of the introductory statements at the press conference following ECB policy meetings. We examine whether this form of ECB communication adds information to a shadow interest rate that summarises the overall policy stance as interpreted by financial markets. To measure communication, we use information based on ECB press releases distinguishing between topics like inflation, the real economy and monetary developments. We also look at the effect of communication on consensus expectations about key macroeconomic variables. Especially ECB’s assessment of the economy, i.e. communication related to economic growth, triggers movement in financial markets and thereby the shadow rate. Communication of the ECB through its press releases also causes professional forecasters to change their outlook. Not only their growth forecasts are affected, also their expectations for M3 growth and inflation are.

Keywords: Central bank communication; shadow rates; consensus expectations; ECB; euro area; money growth (search for similar items in EconPapers)
JEL-codes: E3 E43 E51 E52 E58 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2019-10
New Economics Papers: this item is included in nep-cba, nep-eec, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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https://doi.org/10.3929/ethz-b-000368196 (application/pdf)

Related works:
Journal Article: The role of ECB communication in guiding markets (2021)
Working Paper: The Role of ECB Communication in Guiding Markets (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:kof:wpskof:19-446

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