Managing Financial Market Expectations: The Role of Central Bank Transparency and Central Bank Communication

Managing Financial Market Expectations: The Role of Central Bank Transparency and Central Bank Communication

In this paper, we study the influence of central bank transparency and informal central bank communication on the formation of money market expectations. The sample covers nine major central banks from January 1999 to July 2007. We find, first, that transparency reduces the bias in money market expe...

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Bibliografiska uppgifter
I publikationen:MAGKS - Joint Discussion Paper Series in Economics (Band 28-2010)
Huvudupphovsman: Neuenkirch, Matthias
Materialtyp: Arbeit
Språk:engelska
Publicerad: Philipps-Universität Marburg 2010
Ämnen:
Wirtschaft
Central Bank Transparency
Interest Rate Decision
Financial Market Expectations
Monetary Policy
Central Bank Communication
Money Market
Economics
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Sammanfattning:In this paper, we study the influence of central bank transparency and informal central bank communication on the formation of money market expectations. The sample covers nine major central banks from January 1999 to July 2007. We find, first, that transparency reduces the bias in money market expectations and dampens their variation. Second, informal communications help manage financial market expectations by reducing the variation of expectations. Third, various subcategories of the Eijffinger and Geraats (2006) transparency index lead to a smaller bias in expectations (in particular, evaluation of policy outcome and explanation of interest rate decisions) and to a reduction in the variation of expectations (in particular, explicit prioritization of objectives and provision of information on unanticipated macroeconomic disturbances).
Fysisk beskrivning:29 Seiten
ISSN:1867-3678
DOI:10.17192/es2024.0058

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