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Non-standard monetary policy and ECB communication: Confusion or predictability?

Author

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  • Bro de Comères, Quentin
  • Oros, Cornel
  • Pourroy, Marc
  • Raguideau-Hannotin, Léonore
  • Vaubourg, Anne-Gaël

Abstract

Using a dataset of 273 press releases and introductory statements over the period 1999-2020, we investigate how the communication of the European Central Bank (ECB) influences the ability of market participants to predict its monetary decisions. We build four new indicators of communication intensity and frequency and measure predictability by decomposing the surprises on the variation of asset prices around monetary announcements into a “target” – which captures the standard dimension of monetary policy surprises – a “path” factor – which corresponds to the forward guidance dimension of monetary surprises – and a QE factor – which accounts for their quantitative easing dimension. Our findings reveal that the intensity and frequency of ECB communication reduce the surprise of market participants regarding non-standard dimensions of monetary policy. Moreover, the improvement of the predictability of monetary decisions is not achieved at the expense of greater confusion over standard monetary decisions. Additionally, the reduction in surprises operates through the information channel, by which monetary policy announcements transfer information about economic fundamentals from the central bank to market participants.

Suggested Citation

  • Bro de Comères, Quentin & Oros, Cornel & Pourroy, Marc & Raguideau-Hannotin, Léonore & Vaubourg, Anne-Gaël, 2025. "Non-standard monetary policy and ECB communication: Confusion or predictability?," Journal of International Money and Finance, Elsevier, vol. 151(C).
    • Handle: RePEc:eee:jimfin:v:151:y:2025:i:c:s0261560624002237
    DOI: 10.1016/j.jimonfin.2024.103236
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    More about this item

    Keywords

    Monetary policy; Communication; Transparency; Predictability; Surprise; Factor decomposition;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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