IDEAS home Printed from https://ideas.repec.org/p/zbw/rwirep/692.html
   My bibliography  Save this paper

Central bank communication: Managing expectations through the monetary dialogue

Author

Listed:
  • Belke, Ansgar

Abstract

Successfully managing a course back to normality ("exit") will depend crucially on the central banks' ability to communicate effectively a credible strategy for an orderly exit from such kind of policies. In this context, clear, deliberate, coordinated messages that are anchored in the central banks' mandate are essential. We focus upon transparency and "forward guidance" as potential tools to stimulate the economy in the Euro Area. We then deliver details on whether and how the effectiveness of central bank's policies can be improved through more transparency and "forward guidance". We do so by highlighting marked differences in the Fed's and the ECB's interpretation of "forward guidance". In order to highlight the key issues of central bank communication and the management of expectations referring to a practical institutional example, we also comment on the role of the Monetary Dialogue, i.e. the regular appearances of the President of the European Central Bank (ECB) before the European Parliament (EP), in the context of an evolving monetary policy. Communication is finally described as a policy option in terms of minimising risk in the context of exit from unconventional monetary policies and of the signalling channel which refers to what the public learns from announcements of unconventional monetary policy operations such as Quantitative Easing.

Suggested Citation

  • Belke, Ansgar, 2017. "Central bank communication: Managing expectations through the monetary dialogue," Ruhr Economic Papers 692, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
  • Handle: RePEc:zbw:rwirep:692
    DOI: 10.4419/86788802
    as

    Download full text from publisher

    File URL: https://www.econstor.eu/bitstream/10419/157843/1/886560578.pdf
    Download Restriction: no

    File URL: https://libkey.io/10.4419/86788802?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Ansgar Belke, 2010. "Driven by the markets? ECB sovereign bond purchases and the securities markets programme," Intereconomics: Review of European Economic Policy, Springer;ZBW - Leibniz Information Centre for Economics;Centre for European Policy Studies (CEPS), vol. 45(6), pages 357-363, November.
    2. Hayo, Bernd & Neuenkirch, Matthias, 2015. "Central bank communication in the financial crisis: Evidence from a survey of financial market participants," Journal of International Money and Finance, Elsevier, vol. 59(C), pages 166-181.
    3. Jacopo Cimadomo, 2016. "Real-Time Data And Fiscal Policy Analysis: A Survey Of The Literature," Journal of Economic Surveys, Wiley Blackwell, vol. 30(2), pages 302-326, April.
    4. Markus K. Brunnermeier & Lasse Heje Pedersen, 2009. "Market Liquidity and Funding Liquidity," The Review of Financial Studies, Society for Financial Studies, vol. 22(6), pages 2201-2238, June.
    5. Belke, Ansgar & Freytag, Andreas & Keil, Jonas & Schneider, Friedrich, 2014. "The credibility of monetary policy announcements: Empirical evidence for OECD countries since the 1960s," International Review of Economics & Finance, Elsevier, vol. 33(C), pages 217-227.
    6. Belke, Ansgar & Potrafke, Niklas, 2012. "Does government ideology matter in monetary policy? A panel data analysis for OECD countries," Journal of International Money and Finance, Elsevier, vol. 31(5), pages 1126-1139.
    7. Ansgar Belke & Barbara Styczynska, 2006. "The Allocation of Power in the Enlarged ECB Governing Council: An Assessment of the ECB Rotation Model," Journal of Common Market Studies, Wiley Blackwell, vol. 44(5), pages 865-897, December.
    8. 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.
    9. Ansgar Belke, 2014. "Monetary dialogue 2009–2014: Looking backward, looking forward," Intereconomics: Review of European Economic Policy, Springer;ZBW - Leibniz Information Centre for Economics;Centre for European Policy Studies (CEPS), vol. 49(4), pages 204-211, July.
    10. Lars E.O. Svensson, 2015. "Day One Keynote Address: Forward Guidance," International Journal of Central Banking, International Journal of Central Banking, vol. 11(4), pages 19-64, September.
    11. Gros, Daniel & Alcidi, Cinzia & Belke, Ansgar & Coutinho, Leonor & Giovannini, Alessandro, 2014. "State-of-play in implementing macroeconomic adjustment programmes in the euro area," VfS Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100407, Verein für Socialpolitik / German Economic Association.
    12. M. Middeldorp, 2011. "Central Bank Transparency, the Accuracy of Professional Forecasts, and Interest Rate Volatility," Working Papers 11-12, Utrecht School of Economics.
    13. Ansgar Belke & Daniel Gros, 2005. "Asymmetries in Transatlantic Monetary Policy‐making: Does the ECB Follow the Fed?," Journal of Common Market Studies, Wiley Blackwell, vol. 43(5), pages 921-946, December.
    14. Richhild Moessner, 2015. "Reactions of real yields and inflation expectations to forward guidance in the United States," Applied Economics, Taylor & Francis Journals, vol. 47(26), pages 2671-2682, June.
    15. Lars E.O. Svensson, 2014. "Forward Guidance," NBER Working Papers 20796, National Bureau of Economic Research, Inc.
    16. Bauer, Michael D. & Neely, Christopher J., 2014. "International channels of the Fed's unconventional monetary policy," Journal of International Money and Finance, Elsevier, vol. 44(C), pages 24-46.
    17. Belke, Ansgar & Gros, Daniel & Osowski, Thomas, 2016. "Did quantitative easing affect interest rates outside the US? New evidence based on interest rate differentials," CEPS Papers 11266, Centre for European Policy Studies.
    18. Claudio BorioBy & Piti Disyatat & Mikael Juselius, 2017. "Rethinking potential output: embedding information about the financial cycle," Oxford Economic Papers, Oxford University Press, vol. 69(3), pages 655-677.
    19. Michael Woodford, 2005. "Central bank communication and policy effectiveness," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, issue Aug, pages 399-474.
    20. Kedan, Danielle & Stuart, Rebecca, 2014. "Central Bank Communications: A Comparative Study," Quarterly Bulletin Articles, Central Bank of Ireland, pages 89-104, April.
    21. Hahn, Volker, 2017. "Committee design with endogenous participation," Games and Economic Behavior, Elsevier, vol. 102(C), pages 388-408.
    22. repec:zbw:rwirep:0482 is not listed on IDEAS
    23. Petra M. Geraats, 2007. "The Mystique of Central Bank Speak," International Journal of Central Banking, International Journal of Central Banking, vol. 3(1), pages 37-80, March.
    24. Ansgar Belke & Yuhua Cui, 2010. "US–Euro Area Monetary Policy Interdependence: New Evidence from Taylor Rule‐based VECMs," The World Economy, Wiley Blackwell, vol. 33(5), pages 778-797, May.
    25. Hans Gersbach & Volker Hahn, 2012. "Information acquisition and transparency in committees," International Journal of Game Theory, Springer;Game Theory Society, vol. 41(2), pages 427-453, May.
    26. Hans Gersbach & Volker Hahn, 2011. "Monetary Policy Inclinations," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 43(8), pages 1707-1717, December.
    27. Ehrmann, Michael & Fratzscher, Marcel, 2005. "How should central banks communicate?," Working Paper Series 557, European Central Bank.
    28. Ansgar Belke, 2010. "How Much Fiscal Backing Must the ECB Have?: The Euro Area Is Not the Philippines," Discussion Papers of DIW Berlin 996, DIW Berlin, German Institute for Economic Research.
    29. Clemens J. M. Kool & Daniel L. Thornton, 2015. "How Effective Is Central Bank Forward Guidance?," Review, Federal Reserve Bank of St. Louis, vol. 97(4), pages 303-322.
    30. Eijffinger, S.C.W. & Mahieu, R.J. & Raes, L.B.D., 2013. "Estimating the Preferences of Central Bankers : An Analysis of Four Voting Records," Discussion Paper 2013-047, Tilburg University, Center for Economic Research.
    31. Jens H. E. Christensen & Glenn D. Rudebusch, 2012. "The Response of Interest Rates to US and UK Quantitative Easing," Economic Journal, Royal Economic Society, vol. 122(564), pages 385-414, November.
    32. Kempkes, Gerhard, 2012. "Cyclical adjustment in fiscal rules: Some evidence on real-time bias for EU-15 countries," Discussion Papers 15/2012, Deutsche Bundesbank.
    33. Hans Gersbach & Volker Hahn, 2009. "Voting Transparency in a Monetary Union," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 41(5), pages 831-853, August.
    34. Goodfriend, Marvin, 1986. "Monetary mystique: Secrecy and central banking," Journal of Monetary Economics, Elsevier, vol. 17(1), pages 63-92, January.
    35. 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.
    36. Francisco De Castro & Javier J. Pérez & Marta Rodríguez‐Vives, 2013. "Fiscal Data Revisions in Europe," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 45(6), pages 1187-1209, September.
    37. Woodford, Michael, 2013. "Forward Guidance by Inflation-Targeting Central Banks," CEPR Discussion Papers 9722, C.E.P.R. Discussion Papers.
    38. repec:bla:jcmkts:v:44:y:2006:i::p:865-897 is not listed on IDEAS
    39. Ansgar Belke & Daniel Gros, 2005. "Asymmetries in the Trans-Atlantic Monetary Policy Relationship: Does the ECB follow the Fed?," CESifo Working Paper Series 1428, CESifo.
    40. Ianthi Vayid, 2013. "Central Bank Communications Before, During and After the Crisis: From Open-Market Operations to Open-Mouth Policy," Staff Working Papers 13-41, Bank of Canada.
    41. repec:pri:cepsud:161blinder is not listed on IDEAS
    42. Ley, Eduardo & Misch, Florian, 2013. "Real-time macro monitoring and fiscal policy," Policy Research Working Paper Series 6303, The World Bank.
    43. Ansgar Belke & Barbara Schnurbein, 2012. "European monetary policy and the ECB rotation model," Public Choice, Springer, vol. 151(1), pages 289-323, April.
    44. repec:cii:cepiei:2010-4ta is not listed on IDEAS
    45. Ansgar Belke & Thorsten Polleit, 2010. "How much fiscal backing must the ECB have? The euro area is not (yet) the Philippines," International Economics, CEPII research center, issue 124, pages 5-30.
    46. N. Nergiz Dincer & Barry Eichengreen, 2007. "Central Bank Transparency: Where, Why, and with What Effects?," NBER Working Papers 13003, National Bureau of Economic Research, Inc.
    47. Detmers, Gunda-Alexandra & Nautz, Dieter, 2013. "How Stale Central Bank Interest Rate Projections Affect Interest Rate Uncertainty," VfS Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79861, Verein für Socialpolitik / German Economic Association.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Silvana Prodan & Dan-Cristian Dabija, 2023. "Adapting the Digital Servuction Model to Central Banks: Case Study: European Central Bank," Administrative Sciences, MDPI, vol. 13(10), pages 1-21, October.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ansgar Belke, 2014. "Monetary Dialogue 2009-2014 – Looking Backward, Looking Forward," Ruhr Economic Papers 0477, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    2. repec:zbw:rwirep:0477 is not listed on IDEAS
    3. Ansgar Belke, 2014. "Monetary dialogue 2009–2014: Looking backward, looking forward," Intereconomics: Review of European Economic Policy, Springer;ZBW - Leibniz Information Centre for Economics;Centre for European Policy Studies (CEPS), vol. 49(4), pages 204-211, July.
    4. Richhild Moessner & David-Jan Jansen & Jakob de Haan, 2017. "Communication About Future Policy Rates In Theory And Practice: A Survey," Journal of Economic Surveys, Wiley Blackwell, vol. 31(3), pages 678-711, July.
    5. Paul Hubert & Fabien Labondance, 2016. "The Effect of ECB Forward Guidance on Policy Expectations," Working Papers hal-01394821, HAL.
    6. repec:spo:wpmain:info:hdl:2441/2g6qj1trtu8q2r79ee4jp49krd is not listed on IDEAS
    7. repec:hal:spmain:info:hdl:2441/2g6qj1trtu8q2r79ee4jp49krd is not listed on IDEAS
    8. van der Cruijsen, C.A.B., 2008. "The economic impact of central bank transparency," Other publications TiSEM 86c1ba91-1952-45b4-adac-8, Tilburg University, School of Economics and Management.
    9. Ansgar Belke, 2013. "Non-Standard Monetary Policy Measures – Magic Wand or Tiger by the Tail?," Ruhr Economic Papers 0447, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    10. Svensson, Lars E.O., 2009. "Transparency under Flexible Inflation Targeting: Experiences and Challenges," CEPR Discussion Papers 7213, C.E.P.R. Discussion Papers.
    11. Belke Ansgar, 2013. "Non-Standard Monetary Policy Measures – Magic Wand or Tiger by the Tail?," Review of Economics, De Gruyter, vol. 64(3), pages 341-368, December.
    12. repec:zbw:rwirep:0447 is not listed on IDEAS
    13. Donato Masciandaro & Davide Romelli & Gaia Rubera, 2021. "Monetary policy and financial markets: evidence from Twitter traffic," BAFFI CAREFIN Working Papers 21160, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.
    14. Araujo, Luiz Nelson, 2016. "Dissemination of Information by the Federal Reserve System: An Overview and Benchmark," MPRA Paper 73185, University Library of Munich, Germany.
    15. Ngomba Bodi, Francis Ghislain & Tadadjeu Wemba, Dessy-Karl & Soulemanou, Soulemanou, 2020. "Transparence des Banques Centrales et efficacité de la politique monétaire : quelles implications pour la Banque des Etats de l’Afrique Centrale ? [Central Bank's Transparency and effectiveness of ," MPRA Paper 116436, University Library of Munich, Germany.
    16. Donato Masciandaro & Davide Romelli & Gaia Rubera, 2020. "Tweeting on Monetary Policy and Market Sentiments: The Central Bank Surprise Index," BAFFI CAREFIN Working Papers 20134, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.
    17. Ma, Yong & Li, Shushu, 2015. "Bayesian estimation of China's monetary policy transparency: A New Keynesian approach," Economic Modelling, Elsevier, vol. 45(C), pages 236-248.
    18. Michelle Bongard & Gabriele Galati & Richhild Moessner & William Nelson, 2021. "Connecting the dots: Market reactions to forecasts of policy rates and forward guidance provided by the Fed," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(1), pages 684-706, January.
    19. Volker Hahn, 2009. "Why the Publication of Socially Harmful Information May Be Socially Desirable," CER-ETH Economics working paper series 09/122, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
    20. Bernd Hayo & Ummad Mazhar, 2014. "Monetary Policy Committee Transparency: Measurement, Determinants, and Economic Effects," Open Economies Review, Springer, vol. 25(4), pages 739-770, September.
    21. Federico M. Giesenow & Jakob de Haan, 2019. "The influence of government ideology on monetary policy: New cross‐country evidence based on dynamic heterogeneous panels," Economics and Politics, Wiley Blackwell, vol. 31(2), pages 216-239, July.
    22. Di Bartolomeo Giovanni & Hughes Hallett Andrew & Acocella Nicola, 2013. "When Can Policy Makers Anchor Expectations? Dynamic controllability and the limits to time inconsistency," wp.comunite 0104, Department of Communication, University of Teramo.
    23. Rholes, Ryan & Petersen, Luba, 2021. "Should central banks communicate uncertainty in their projections?," Journal of Economic Behavior & Organization, Elsevier, vol. 183(C), pages 320-341.
    24. Cleomar Gomes da silva & Flavio V. Vieira, 2016. "Monetary policy decision making: the role of ideology, institutions and central bank independence," Economics Bulletin, AccessEcon, vol. 36(4), pages 2051-2062.

    More about this item

    Keywords

    central bank communication; European Central Bank; forward guidance; monetary dialogue; transparency;
    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
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:zbw:rwirep:692. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ZBW - Leibniz Information Centre for Economics (email available below). General contact details of provider: https://edirc.repec.org/data/rwiesde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.