Central Bank Communication in the Financial Crisis: Evidence from a Survey of Financial Market Participants

Trier Research Papers in Economics No. 1/14

30 Pages Posted: 8 Jan 2014 Last revised: 7 Dec 2014

See all articles by Bernd Hayo

Bernd Hayo

University of Marburg - School of Business & Economics

Matthias Neuenkirch

University of Trier - Faculty of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: December 6, 2014

Abstract

In this paper, we study whether central bank communication has a positive effect on market participants’ perception of central banks’ (i) credibility, (ii) unorthodox measures, and (iii) independence. We utilise a survey of more than 550 financial market participants from around the world who answered questions in reference to the Bank of England (BoE), the Bank of Japan (BoJ), the European Central Bank (ECB), and the Federal Reserve (Fed). We find that market participants believe that the Fed communicates best, followed by the BoE, ECB, and BoJ. Similar rankings are found on the issues of credibility, satisfaction with unconventional monetary policy, and possible deterioration in independence. Using ordered probit models, we show that central bank communication has a positive effect on how central banks are perceived and understood, as it enhances credibility, increases satisfaction with unorthodox measures, and fosters perceived independence of central banks.

Keywords: Central Bank, Communication, Credibility, Financial Crisis, Financial Market Participants, Independence, Survey, Unconventional Monetary Policy.

JEL Classification: E52, E58

Suggested Citation

Hayo, Bernd and Neuenkirch, Matthias, Central Bank Communication in the Financial Crisis: Evidence from a Survey of Financial Market Participants (December 6, 2014). Trier Research Papers in Economics No. 1/14, Available at SSRN: https://ssrn.com/abstract=2376165 or http://dx.doi.org/10.2139/ssrn.2376165

Bernd Hayo (Contact Author)

University of Marburg - School of Business & Economics ( email )

Universitaetsstr. 24
Marburg, D-35032
Germany
++49(0)6421-28-23091 (Phone)
++49(0)6421-28-23193 (Fax)

Matthias Neuenkirch

University of Trier - Faculty of Economics ( email )

Universitätsring 15
Trier, 54296
Germany
+49 - (0)651 - 201 - 2629 (Phone)

HOME PAGE: http://www.uni-trier.de/index.php?id=50130

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

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