June 2009 issue contents
Explaining Monetary Policy in Press Conferences

by Michael Ehrmann and Marcel Fratzscher
European Central Bank


The question of how best to communicate monetary policy decisions remains a highly topical issue among central banks. Focusing on the experience of the European Central Bank, this paper studies how explanations of monetary policy decisions at press conferences are perceived by financial markets. The empirical findings show that ECB press conferences provide substantial additional information to financial markets beyond that contained in the monetary policy decisions, and that the information content is closely linked to the characteristics of the decisions. Press conferences have on average had larger effects on financial markets than the corresponding policy decisions, with lower effects on volatility. Moreover, the Q&A part of the press conference fulfills a clarification role, in particular during periods of large macroeconomic uncertainty.

JEL Codes: E52, E58, G14.

Full article (PDF, 44 pages 495 kb)