انتقال سیاست پولی در بردار های خود رگرسیون : یک روش جدید بکار گرفته شده در ارتباطات بانک مرکزی

In this paper, we study the role played by central bank communication in monetary policy transmission. We employ the Swiss Economic Institute’s Monetary Policy Communicator to measure the future stance of the European Central Bank’s monetary policy. Our results indicate, first, that communication has an influence on inflation (expectations) similar to that of actual target rate changes. Communication also plays a noticeable role in the transmission of monetary policy to output. Consequently, future work on monetary policy transmission should incorporate both a short-term interest rate and a communication indicator. A second finding is that the monetary policy transmission mechanism changed during the financial crisis as the overall effect of monetary policy on (expected) inflation and output is weaker and of shorter duration during this period compared to the overall sample period.

Ever since Sims’s seminal paper (1980), monetary policy transmission typically has been studied using a vector autoregression (VAR) approach. In general, contractive monetary policy is found to decrease output and price level, with a maximum impact occurring after a time lag of 12–24 months (see, e.g., literature surveys by Leeper et al., 1996 and Christiano et al., 1999). Several indicators of monetary policy stance have been tested over the past three decades: a monetary aggregate (Sims, 1980), an indicator based on minutes from meetings of the Federal Open Market Committee (Romer and Romer, 1989), non-borrowed reserves at the central bank (Eichenbaum, 1992), a surprise measure based on Federal funds futures (Faust et al., 2004), and the short-term interest rate (Sims, 1992), which is currently the most widely accepted single indicator (Bernanke and Blinder, 1992). Over the past 15 years, central bank communication has evolved as an important tool for central bankers. By providing regular information about its economic outlook and the future stance of monetary policy, a central bank can influence the interest rate expectations of forward-looking agents before the interest rate actually changes. 1 As a consequence, there are fewer unexpected changes in monetary policy ( Blinder et al., 2008) and studying actual interest rate shocks could thus result in a less than complete picture of the monetary transmission mechanism. Specifically, VAR models that neglect the role of communication may overestimate the effect of actual interest rate changes. To date, however, the importance of central bank communication in the context of monetary policy transmission mechanisms has not been studied empirically,2 even though analyzing the dynamics of the short-term interest rate, output, and inflation after (gradual) changes in communication could prove insightful. This paper fills this gap in the literature and employs the Swiss Economic Institute’s (KOF) Monetary Policy Communicator (MPC) as an additional variable for measuring communication about the future course of European Central Bank (ECB) monetary policy. This indicator covers forward-looking information about risks to price stability as revealed in the ECB president’s statement after each interest rate decision (KOF, 2007) and provides a quantitative assessment of the ECB’s expected future interest rate plans. The indicator might explain transmission processes prior to actual interest rate movements. Our sample period begins with the inception of the ECB in January 1999 and ends in December 2012 (168 monthly observations). Econometrically, we use VAR models to address the following research question: Does central bank communication play any role in the transmission of ECB monetary policy to inflation expectations, actual inflation, and output? Our prior is that communication fosters anticipation of future interest rate changes and is thus an important policy tool in monetary policy transmission. Since our sample covers the recent financial crisis we are also able to test whether the monetary policy transmission mechanism was different during that time span compared to the overall sample period. The reminder of the paper is organized as follows. Section 2 introduces the dataset. Section 3 describes the econometric methodology. Section 4 discusses the empirical results. Section 5 concludes.

In this paper, we use a VAR model to study the influence of central bank communication on monetary policy transmission. We employ the Swiss Economic Institute’s Monetary Policy Communicator as a variable (along with the main refinancing rate) to measure the European Central Bank’s future monetary policy stance. Our sample covers the period January 1999–December 2012. Our main findings are as follows. First, communication about future monetary policy influences expected inflation and actual inflation similarly as the actual MRR. Industrial production, however, is more strongly affected by actual interest rate shocks. Communication mildly crowds out the effects of monetary policy shocks; the influence of the MRR is marginally lower and the outside lag slightly longer (in case of actual inflation) in a model that contains central bank communication compared to a benchmark model without it. However, a VAR model using communication as the sole indicator of monetary policy performs much worse than the benchmark model. Thus, communication complements the short-term interest rate in the monetary policy transmission process. Our results indicate that both inflation expectations and actual inflation react as strongly to shocks in communication about future monetary policy as they do to actual shocks in the target rate. Systematic central bank communication—as engaged in by the ECB—successfully improves the management of expectations about future interest rates. Changes in communication precede changes in the short-term interest rate by about 14 months. Thus, given its importance in the transmission process and its impact on inflation and inflation expectations, we conclude that communication improves the efficacy of monetary policy. We show that studying monetary policy transmission mechanisms needs to involve more than just analyzing rare shocks in the short-term interest rate. Future work on monetary policy transmission should take note of our findings and employ an indicator for central bank communication. An assessment of Federal Reserve communication in this context would be a fruitful avenue for future research. Facing the zero lower bound of interest rates, the Federal Reserve uses communication to keep expectations of the future target rates low.11 Employing the traditional short-term interest rate as the single indicator would fail to reveal this “easing” bias. Second, since our sample covers the recent financial crisis we are able to test whether monetary policy transmission changed during that time span compared to the overall sample period. Despite a stronger peak effect during the financial crisis period, the overall effect of monetary policy on (expected) inflation and output is weaker during the crisis since it is less enduring than during normal times. In general, this is bad news for the ECB since stimulating the real economy seems to be considerably more difficult during the financial crisis period and, worse, there is not much scope for further stimulus using conventional interest rate policy.12 Third, we explore the maximum potential influence of interest rate shocks on (expected) inflation and output using the median MRR surprise based on the Reuters poll conducted one week before each Governing Council. Not surprisingly, the peak impact on (expected) inflation and, in particular, on output is more pronounced than in case of shocks identified by means of the empirical model. However, despite this stronger peak effect, all three shocks die out in a way similar to that observed with the Cholesky identification. Finally, as mentioned in the introduction, one caveat to the VAR methodology is that it analyzes the reaction of macroeconomic variables to shocks and ignores the role of expected interest rate changes, which, in reality, account for the overwhelming majority of interest rate decisions. Thus, our findings should be interpreted cautiously as we provide evidence only for the role of unexpected shocks as identified in communication and the interest rate.