Central Banks’ Predictability: An Assessment by Financial Market Participants

18 Pages Posted: 6 Apr 2016

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: April 3, 2016

Abstract

In this paper, we examine the relationship between market participants’ perception of central bank predictability and their assessment of central bank communication skills and success in conveying objectives as well as the importance of transparency-enhancing measures, such as voting records, transcripts or minutes of policy meetings, and conditional interest rate projections. Our analysis is based on a unique dataset of almost 500 market participants worldwide who were asked questions with respect to the performance of the Bank of England, the Bank of Japan, the European Central Bank, and the Federal Reserve. Our results indicate a positive and economically notable relationship between central banks’ ability to convey their objectives and their overall communication skills on the one hand, and market participants’ perception of the banks’ predictability on the other hand, for all four central banks. The dissemination of more specific information does not appear to contribute to better central bank predictability. This raises doubts about the widely-held notion that implementing ever more transparency-enhancing measures will improve central bank predictability.

Keywords: Central Bank, Communication, Financial Market Participants, Objectives, Predictability, Survey, Transparency

JEL Classification: E52, E58

Suggested Citation

Hayo, Bernd and Neuenkirch, Matthias, Central Banks’ Predictability: An Assessment by Financial Market Participants (April 3, 2016). Available at SSRN: https://ssrn.com/abstract=2758345 or http://dx.doi.org/10.2139/ssrn.2758345

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

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
44
Abstract Views
496
PlumX Metrics