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Do ECB's Statements Steer Short-Term and Long-Term Interest Rates in the Euro Zone ?

Author

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  • Marie Musard-Gies

    (LEO - Laboratoire d'économie d'Orleans [2008-2011] - UO - Université d'Orléans - CNRS - Centre National de la Recherche Scientifique)

Abstract

In this paper, we aim at testing whether press conferences held after the meeting of the ECB's monetary policy council steer market short- and long-term interest rates in the euro zone. To meet this goal, we "codify" the statements according to whether they are neutral, hawkish, or dovish. We show, using a principal components analysis of euro-zone (short- and long-term) interest rates that the euro-zone's market rates, react significantly to the bias in statements, and more particularly to changes in statements from one meeting to the next. If we study separately the reaction of short- and long-term interest rates to change in statements, the short end of the yield curve reacts more sharply to statements than the long segment. We show that the effect of statements peaks on interest rates with a maturity of six or twelve months and is smaller for the longer maturities. Using non-parametric tests confirms our previous results.

Suggested Citation

  • Marie Musard-Gies, 2006. "Do ECB's Statements Steer Short-Term and Long-Term Interest Rates in the Euro Zone ?," Working Papers halshs-00007692, HAL.
    • Handle: RePEc:hal:wpaper:halshs-00007692
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00007692
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    Cited by:

    1. Alan S. Blinder & Michael Ehrmann & Marcel Fratzscher & Jakob De Haan & David-Jan Jansen, 2008. "Central Bank Communication and Monetary Policy: A Survey of Theory and Evidence," Journal of Economic Literature, American Economic Association, vol. 46(4), pages 910-945, December.

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