Do Words Speak Louder than Actions? The Conduct of Monetary Policy at the Bundesbank

31 Pages Posted: 21 Nov 2000

See all articles by Martin T. Bohl

Martin T. Bohl

University of Muenster

Pierre L. Siklos

Wilfrid Laurier University - School of Business & Economics; Balsillie school of international affairs

Date Written: October 2000

Abstract

This paper proposes that an important tenet of monetary policy, as practiced by the Bundesbank, is how it communicates with the public. The results have implications for the conduct of monetary policy more generally. Indeed, recent Fed behavior may also be likened to the experience of the Bundesbank. We argue that communication by senior central bank officials represents an instrument of monetary policy which supplements discount rate changes or announcements of target growth rates for the money supply. Moreover, the communications instrument can help exlain how a central bank can deal with the uncertainties inherent in monetary policy not transmitted via frequent changes in in interest rates or money growth targets. Empirical evidence, using monthly data, shows how speeches, especially by the Bundesbank's President, are linked to interest rate behavior.

Keywords: Bundesbank, reaction function, central bank communication

JEL Classification: E52,E58,C31,C32,C53

Suggested Citation

Bohl, Martin T. and Siklos, Pierre L., Do Words Speak Louder than Actions? The Conduct of Monetary Policy at the Bundesbank (October 2000). Available at SSRN: https://ssrn.com/abstract=246837 or http://dx.doi.org/10.2139/ssrn.246837

Martin T. Bohl

University of Muenster ( email )

Schlossplatz 2
D-48149 Muenster, D-48149
Germany

Pierre L. Siklos (Contact Author)

Wilfrid Laurier University - School of Business & Economics ( email )

Department of Economics
75 University Avenue W.
Waterloo, Ontario N2L 3C5
Canada
519-884-0710 Ext.. 3491 (Phone)

HOME PAGE: http://pierrelsiklos.com

Balsillie school of international affairs ( email )

67 Erb Street West
Waterloo, ON N2L 6C2
Canada

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