The Importance of Being Vigilant: Has ECB Communication Influenced Euro Area Inflation Expectations?

29 Pages Posted: 5 Nov 2007

See all articles by David-Jan Jansen

David-Jan Jansen

De Nederlandsche Bank ; Vrije Universiteit Amsterdam, School of Business and Economics; Tinbergen Institute

Jakob de Haan

University of Groningen - Faculty of Economics and Business; CESifo (Center for Economic Studies and Ifo Institute); De Nederlandsche Bank

Date Written: October 2007

Abstract

Using daily data on inflation-indexed bonds, we find evidence of a negative relationship between ECB communication regarding risks to price stability - measured on the basis of the frequency and strength of the keyword 'vigilance' - and changes in euro area break-even inflation. However, this result is only found for the second half of 2005. At that time, the start of a tightening of ECB monetary policy was increasingly likely. This suggests that communication should be closely in line with policy actions before it can be effective. Still, we also find that the economic significance of this type of communication has been small.

Keywords: central bank communication, ECB, inflation expectations

JEL Classification: E52, E58

Suggested Citation

Jansen, David-Jan and de Haan, Jakob, The Importance of Being Vigilant: Has ECB Communication Influenced Euro Area Inflation Expectations? (October 2007). CESifo Working Paper No. 2134, Available at SSRN: https://ssrn.com/abstract=1027576 or http://dx.doi.org/10.2139/ssrn.1027576

David-Jan Jansen (Contact Author)

De Nederlandsche Bank ( email )

P.O. Box 98
1000 AB Amsterdam
Netherlands

HOME PAGE: http://sites.google.com/site/djansenresearch

Vrije Universiteit Amsterdam, School of Business and Economics ( email )

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Amsterdam, 1081HV
Netherlands

Tinbergen Institute ( email )

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

Jakob De Haan

University of Groningen - Faculty of Economics and Business ( email )

PO Box 800
Groningen, 9700 AV
Netherlands
+31 0 50 3633706 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

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Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

De Nederlandsche Bank ( email )

P.O. Box 98
Amsterdam, 1000 AB
Netherlands

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