Do Actions Speak Louder than Words? Evaluating Monetary Policy at the Bundesbank

38 Pages Posted: 6 Nov 2005

See all articles by Pierre L. Siklos

Pierre L. Siklos

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

Martin T. Bohl

University of Muenster

Abstract

This paper proposes that an important instrument of monetary policy of the Bundesbank, is how it communicates with the public. We argue that communication by senior central bank officials represents an instrument of monetary policy that complements changes in interest rates. Moreover, the communications instrument can partly explain how a central bank can respond to real economic developments even as it focuses on an inflation objective. Using monthly data, we show how speeches by the Bundesbank's President dealing with inflation help explain both interest rate movements as well as the central bank's response to the unemployment rate.

Keywords: Bundesbank, Taylor rule, central bank communication

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

Suggested Citation

Siklos, Pierre L. and Bohl, Martin T., Do Actions Speak Louder than Words? Evaluating Monetary Policy at the Bundesbank. Journal of Macroeconomics, Forthcoming, Available at SSRN: https://ssrn.com/abstract=833546

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

Martin T. Bohl

University of Muenster ( email )

Schlossplatz 2
D-48149 Muenster, D-48149
Germany

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