Central Bank Communication: Different Strategies, Same Effectiveness? (original) (raw)
The paper assesses the communication strategies of the Federal Reserve, the Bank of England and the European Central Bank and their effectiveness. Based on the content, timing and consistency of statements by the policy committees and its individual members as well as the voting behaviour, we argue that the three central banks are following fundamentally different communication strategies, with the Federal Reserve pursuing an approach that stresses the individual accountability of FOMC members, whereas the European Central Bank has been pursuing a more collegiate, and the Bank of England an intermediate approach. The central finding is that the predictability of policy decisions and the responsiveness of financial markets are equally good for the Federal Reserve and the ECB, though there are important differences in the type of communication that financial markets react to. This suggests that there may not be a single best approach to central bank communication and that the most effective way of communication depends on the circumstances and the environment a central bank operates in.
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