Rosa, Carlo and Verga, Giovanni
The importance of the wording of the ECB.
Centre for Economic Performance, London School of Economics and Political Science, London, UK.
This paper analyses the ECB communication, focusing in particular on its transparency dimension. We posit that if the ECB is transparent about its future policy decisions, then we should be able to forecast fairly well its future interest rate setting behaviour. We find that the predicting ability of the European monetary authority’s words, is similar to the one implied by market-based measures of monetary policy expectations. Moreover, the ECB’s wording provides complementary, rather than substitute, information with respect to economic and monetary variables.
||© 2005 the authors
||ECB communication, transparency, monetary policy forecast, empirical reaction function, Euribor rate curve
|Library of Congress subject classification:
||H Social Sciences > HG Finance
|Journal of Economic Literature Classification System:
||E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E43 - Determination of Interest Rates; Term Structure of Interest Rates
E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E58 - Central Banks and Their Policies
G - Financial Economics > G1 - General Financial Markets > G14 - Information and Market Efficiency; Event Studies
E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E52 - Monetary Policy (Targets, Instruments, and Effects)
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