Central bank communication and the perception of monetary policy by financial market experts
Schmidt, Sandra ;  Nautz, Dieter ;  ;  Universität <Berlin, Freie Universität> / Fachbereich Wirtschaftswissenschaft

Main titleCentral bank communication and the perception of monetary policy by financial market experts
AuthorSchmidt, Sandra
AuthorNautz, Dieter
EditorUniversität <Berlin, Freie Universität> / Fachbereich Wirtschaftswissenschaft
No. of Pages25 S.
Series ; 2010,29 : Economics
KeywordsCentral bank communication; Interest rate forecasts; Survey expectations; Panel random coefficient model
Classification (DDC)337 International economics
339 Macroeconomics and related topics
AbstractThis paper investigates why financial market experts misperceive the interest
rate policy of the European Central Bank (ECB). Assuming a Taylor-rule-type
reaction function of the ECB, we use qualitative survey data on expectations
about the future interest rate, inflation, and output to discover the sources of in-
dividual interest rate forecast errors. Based on a panel random coefficient model,
we show that financial experts have systematically misperceived the ECB's in-
terest rate rule. However, although experts tend to overestimate the impact of
inflation on future interest rates, perceptions of monetary policy have become
more accurate since clarification of the ECB's monetary policy strategy in May
2003. We find that this improved communication has reduced disagreement over
the ECB's response to expected inflation during the financial crisis.
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FU DepartmentDepartment Business and Economics
Other affiliation(s)Institut für Statistik und Ökonometrie
Year of publication2010
Type of documentBook
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Created at2010-12-06 : 02:05:38
Last changed2016-01-05 : 02:38:21
Static URLhttp://edocs.fu-berlin.de/docs/receive/FUDOCS_document_000000008221