Communication of monetary policy in unconventional times

  • Monetary policy communication is particularly important during unconventional times, because high uncertainty about the economy, the introduction of new policy tools and possible limits to the central bank’s toolkit could hamper the predictability of policy actions. We study how monetary policy communication should and has worked under such circumstances. Our main results relate to announcements of asset purchase programmes and the use of forward guidance. We show that announcements of asset purchase programmes have lowered market uncertainty, particularly when accompanied by a contextual release of implementation details such as the envisaged size of the programme. We also show that forward guidance reduces uncertainty more effectively when it is state‐contingent or when it provides guidance about a long horizon than when it is open‐ended or covers only a short horizon, and that the credibility of forward guidance is strengthened if the central bank also has embarked on an asset purchase programme.

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Author:Günter Coenen, Michael Ehrmann, Gaetano Gaballo, Peter Hoffmann, Anton Nakov, Stefano Nardelli, Eric Persson, Georg Strasser
URN:urn:nbn:de:hebis:30:3-438648
URL:https://ssrn.com/abstract=3043098
Parent Title (English):Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 578
Series (Serial Number):CFS working paper series (578)
Publisher:Center for Financial Studies
Place of publication:Frankfurt, M.
Document Type:Working Paper
Language:English
Year of Completion:2017
Year of first Publication:2017
Publishing Institution:Universitätsbibliothek Johann Christian Senckenberg
Release Date:2017/10/17
Tag:Asset Purchase Programme; Central Bank Communication; Forward Guidance; Unconventional Monetary Policy
Issue:September 26, 2017
Page Number:47
HeBIS-PPN:419155821
Institutes:Wirtschaftswissenschaften / Wirtschaftswissenschaften
Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS)
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
Sammlungen:Universitätspublikationen
Licence (German):License LogoDeutsches Urheberrecht