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Same actions, different effects: The conditionality of monetary policy instruments

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  • Hubert, Paul
  • Blot, Christophe
  • Bozou, Caroline
  • Creel, Jérôme

Abstract

This paper explores the signaling effect of central bank announcements clarifying the reaction function of policy interventions. We exploit the unique setting provided by ECB asset purchase programs. We find that the same action – purchases of identical assets – undertaken under different titles generates different responses. PSPP affects inflation swaps whereas PEPP impacts sovereign spreads, so that only the variables associated with the communicated rationale of each program react. We highlight the importance of clarifying the conditional path of policy instruments for the transmission of monetary policy. We also provide evidence of this signaling channel from other ECB and BoE announcements.

Suggested Citation

  • Hubert, Paul & Blot, Christophe & Bozou, Caroline & Creel, Jérôme, 2024. "Same actions, different effects: The conditionality of monetary policy instruments," Journal of Monetary Economics, Elsevier, vol. 147(S).
    • Handle: RePEc:eee:moneco:v:147:y:2024:i:s:s0304393224000497
    DOI: 10.1016/j.jmoneco.2024.103596
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    1. Altavilla, Carlo & Bussière, Matthieu & Galí, Jordi & Gorodnichenko, Yuriy & Gürkaynak, Refet S. & Rey, Hélène, 2024. "A research program on monetary policy for Europe," Journal of Monetary Economics, Elsevier, vol. 147(S).

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    More about this item

    Keywords

    Quantitative easing; Asset prices; Central bank communication; Central bank reaction function; Asset purchases; Forward guidance;
    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
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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