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It's Not Only What is Said, it's Also Who the Speaker is - Evaluating the Effectiveness of Central Bank Communication

National Bank of Poland Working Paper No. 47

40 Pages Posted: 25 Jul 2008  

Marek Rozkrut

National Bank of Poland

Date Written: April 2008

Abstract

On the basis of a unique database of policy makers' comments, we find that central bank communication does influence behavior of financial markets. This effect is asymmetric and depends on the contents and direction of the statements. Moreover, we investigate whether individual characteristics of MPC members may influence their ability to affect the asset prices. We find that market participants are most vigilant to the comments made by policy makers who are relatively reticent, usually win voting and match their words with deeds. Moreover, the impact of statements on financial market behavior depends on whether a speaker represents a hawkish, dovish or neutral faction within the committee. Finally, we provide evidence that central bank communication affects the predictability of monetary policy decisions.

Keywords: Monetary policy, Central bank, Transparency, Communication

JEL Classification: C32, E43, E52, E58, G12

Suggested Citation

Rozkrut, Marek, It's Not Only What is Said, it's Also Who the Speaker is - Evaluating the Effectiveness of Central Bank Communication (April 2008). National Bank of Poland Working Paper No. 47. Available at SSRN: https://ssrn.com/abstract=1167288 or http://dx.doi.org/10.2139/ssrn.1167288

Marek Rozkrut (Contact Author)

National Bank of Poland ( email )

00-919 Warsaw
Poland

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