Communication and Decision-Making by Central Bank Committees: Different Strategies, Same Effectiveness?

By Michael Ehrmann, Marcel Fratzscher. Social Science Research Network, 2005

135 citations recorded by the source corpus.

The paper assesses the communication strategies of the Federal Reserve, the Bank of England and the European Central Bank and their effectiveness. We find that the effectiveness of communication is not independent from the decisionmaking process in the committee. The paper shows that the Federal Reserve has been pursuing a rather individualistic communication strategy amid a collegial approach to decision-making, while the Bank of England is using a collegial communication strategy and highly individualistic decision-making. The ECB has chosen a collegial approach both in its communication and in its decisionmaking. Assessing these strategies, we find that predictability of policy decisions and the responsiveness of financial markets to communication are equally good for the Federal Reserve and the ECB. This suggests that there may not be a single best approach to designing a central bank communication and decisionmaking strategy. JEL Classification: E43, E52, E58, G12

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/3b3f6757bbebbecfca7ac6151e611f5958fc390d

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In Economics and Econometrics

1. Stefan Gerlach
2. Volker Wieland
3. Katrin Assenmacher-Wesche
4. Guenter W. Beck
5. Andrew T. Levin
6. S. Kaufmann

In Finance

1. Stefan Gerlach
2. Volker Wieland
3. Guenter W. Beck
4. Andrew T. Levin
5. Katrin Assenmacher-Wesche
6. S. Kaufmann

Citations in the corpus

• The Impact of ECB Monetary Policy Decisions and Communication on the Yield Curve (2010, unknown): “An alternative approach is taken by Ehrmann and Fratzscher (2005, 2007).”
• Interest Rate Setting by the ECB, 1999-2006: Words and Deeds (2012, background): “…definition of price stability, and many observers have noted that the ECB appears to react strongly to economic activity 2In a related literature, Ehrmann and Fratzscher (2005a, 2005b, 2005c) study the communication of central bank committee members through speeches, testimony, etc., and…”