Central Bank Communication by ??? The Economics of Public Policy Leaks

Abstract

Leaks of confidential information emanating from public institutions have been the focus of a long-standing line of research. Yet, their determinants as well as their potential impact on public views and on policy effectiveness remain elusive. We construct a database of anonymous monetary policy leaks in the euro area as reported by newswires. We provide evidence that many of these leaks are likely placed by individual insiders with minority opinions. Central banks offer a unique setting to study the effects of leaks because associated changes in public views are instantaneously reflected in financial markets. While we find that leaks have large effects on markets and weaken official policy announcements, the evidence also suggests that leaks do not lock in decision-makers, and that attributed communication can mitigate some of their effects.

Keywords: leaks, media, confidential information, central bank communication, monetary policy, European Central Bank

JEL Classification: D83, E52, E58, G14, H83