Central bank communication in the financial crisis: Evidence from a survey of financial market participants

Abstract

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Central Bank Communication and Monetary Policy Predictability under Uncertain Economic Conditions

“…If the communication of the two central banks during the crisis period was compared, the communication from the Federal Reserve seemed to match the deeds more consistently. This result gives empirical support to the results of the financial market survey of Hayo and Neuenkirch (2015) where the Federal Reserve was ranked to have the most credible communication followed by the Bank of England, the ECB, and the Bank of Japan.…”

Who Should You Listen to in a Crisis? Differences in Communication of Central Bank Policymakers

“…Communicating had a large role for monetary policy during the financial crisis as the rapidly growing uncertainty set new challenges which led to a growing number of disagreements among the policymakers (Meade, Burk and Josselyn, 2015) and a remarkable increase in the length of the minutes of central bank meetings as well as a growing number of disagreements between central bank policymakers as the conduct of monetary policy became more complex (Coenen et al, 2017). However, Lehtimäki and Palmu (2019) show that, despite these increases in disagreements and length of minutes, the predictability of monetary policy decisions was reached quite well on an institutional level in the ECB and the Fed as the financial crisis unfolded, although a survey study by Hayo and Neuenkirch (2015) finds that during the crisis, communication from the Fed was perceived to be more credible 3 by financial market participants. This article assumes that disagreements between individual policymakers about the future path of monetary policy can be detected from the comments made to the media and that, despite the decision-making processes in the ECB and the Fed, the preferences of individuals may vary, and this can be observed in their communication.…”

Complexity of ECB communication and financial market trading

“…Central banks began to realise that monetary policy will be more successful when financial market participants understand the rationale behind it (see, e.g., Coeuré, 2018;Lucca & Trebbi, 2011;Praet, 2017). Hayo and Neuenkirch (2015a) discuss how financial market participants themselves evaluate the success of these policies.…”