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CEP discussion paper

The Importance of the Wording of the ECB


This paper analyses the ECB communication, focusing in particular on its transparency dimension. We posit that if the ECB is transparent about its future policy decisions, then we should be able to forecast fairly well its future interest rate setting behaviour. We find that the predicting ability of the European monetary authority’s words, is similar to the one implied by market-based measures of monetary policy expectations. Moreover, the ECB’s wording provides complementary, rather than substitute, information with respect to economic and monetary variables.


Carlo Rosa and Giovanni Verga

June 2005     Paper Number CEPDP0694

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This CEP discussion paper is published under the centre's programme.