Have Monetary Data Releases Helped Markets to Predict the Interest Rate Decisions of the European Central Bank?

35 Pages Posted: 1 Jul 2016

Date Written: July 1, 2016

Abstract

This paper examines whether monetary data releases by the European Central Bank (ECB) have provided markets with additional clues about the future course of its monetary policy. It conducts a novel econometric approach based on a combination of an Ordered Probit model explaining future policy rate changes (sample 2000 to 2014) and the Vuong test for model selection. Overall, our results suggest that information contained in press releases on monetary developments for the euro area has helped markets in forming their expectations on the next monetary policy decision.

Keywords: communication, monetary analysis, predictability, Probit model, Vuong test.

JEL Classification: C34, D78, E52, E58

Suggested Citation

Jung, Alexander, Have Monetary Data Releases Helped Markets to Predict the Interest Rate Decisions of the European Central Bank? (July 1, 2016). ECB Working Paper No. 1926. Available at SSRN: https://ssrn.com/abstract=2803115

Alexander Jung (Contact Author)

European Central Bank ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany
00496913447674 (Phone)
00496913447604 (Fax)

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