ECB Communication and its Impact on Financial Markets

46 Pages Posted: 8 Feb 2022

See all articles by Klodiana Istrefi

Klodiana Istrefi

Banque de France; Centre for Economic Policy Research (CEPR)

Florens Odendahl

Banque de France

Giulia Sestieri

Banque de France

Multiple version iconThere are 2 versions of this paper

Date Written: January 2022

Abstract

This paper introduces the Euro Area Communication Event-Study Database (EA-CED), a new dataset tracking financial market movements around the ECB Governing Council meetings (GC) and inter-meeting communication (IMC). Covering the period from 1999 to 2024, the EA-CED contains intraday changes in euro area financial variables around 304 ECB GC policy announcements and around 4,400 IMC events, the latter being primarily speeches and interviews. We document several new empirical findings regarding the impact of IMC on financial markets. First, we show that many IMC events are associated with significant market movements, often of similar or larger magnitude than ECB policy announcements, particularly for yields at longer maturities. Significant effects are not limited to communication from the ECB president but extend to other members of the Governing Council. Second, the importance of IMC varies over time, reaching its peak around tightening cycles, particularly during 2022-2023. Third, similarly to ECB GC announcements, IMC events convey multidimensional information and lead to surprises related to the path of monetary policy and the state of the economy. 

Keywords: Monetary Policy, ECB, Communication, Financial Markets, Event Study

JEL Classification: E03, E50, E61

Suggested Citation

Istrefi, Klodiana and Odendahl, Florens and Sestieri, Giulia, ECB Communication and its Impact on Financial Markets (January 2022). Banque de France Working Paper No. 859, Available at SSRN: https://ssrn.com/abstract=4028572 or http://dx.doi.org/10.2139/ssrn.4028572

Klodiana Istrefi (Contact Author)

Banque de France ( email )

Paris
France

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Florens Odendahl

Banque de France ( email )

Paris
France

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