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Media Treatment of Monetary Policy Surprises and Their Impact on Firms’ and Consumers’ Expectations

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  • Julien Pinter
  • Evžen Kocenda

Abstract

Do firms’ and consumers’ expectations react to central bank announcements? Past literature has come to divergent conclusions, but it has systematically ignored how media treat the announcements. This paper investigates the link between monetary policy announcements and expectations by taking into account their media treatment. We initially rely on the standard monetary policy surprise measures in the euro area to identify exogenous changes in monetary policy stances. We then analyze how the main general newspapers in France report on announcements. 85 % of the monetary policy surprises are either not associated with the newspapers reporting a change in the monetary policy stance or have a sign that is inconsistent with the media report. Only when we consider media-consistent monetary policy surprises do we find that consumers and firms respond to monetary policy announcements. We then build our own measure of media monetary policy surprises and confirm that these matter. Further analysis reveals that the tonality of the media reports on the economy drives the sign of consumers’ response.

Suggested Citation

  • Julien Pinter & Evžen Kocenda, 2023. "Media Treatment of Monetary Policy Surprises and Their Impact on Firms’ and Consumers’ Expectations," CESifo Working Paper Series 10413, CESifo.
    • Handle: RePEc:ces:ceswps:_10413
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    Cited by:

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    2. Dräger, Lena, 2023. "Central Bank Communication with the General Public," Hannover Economic Papers (HEP) dp-713, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
    3. Bjerkander, Lena & Glas, Alexander, 2024. "Talking in a language that everyone can understand? Clarity of speeches by the ECB Executive Board," Journal of International Money and Finance, Elsevier, vol. 149(C).

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    More about this item

    Keywords

    firm expectations; consumer expectations; monetary policy surprises; European Central Bank; information effect;
    All these keywords.

    JEL classification:

    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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