Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/162691
Authors: 
Ehrmann, Michael
Talmi, Jonathan
Year of Publication: 
2017
Series/Report no.: 
ECB Working Paper 2023
Abstract: 
Press releases announcing and explaining monetary policy decisions play a critical role in the communication strategy of central banks. Due to their market-moving potential, it is particularly important how they are drafted. Often, central banks start from the previous statement, and update the earlier text at the margin. This makes it straightforward to compare statements and see how the central banks thinking has evolved; however, more substantial changes, which will eventually be required, might then be harder to understand. Using variation in the drafting process at the Bank of Canada, this paper studies the extent to which similarity in central bank statements matters for the reception of their content in financial markets. It shows that similar press releases generate less market volatility, but that more substantial textual changes after a sequence of very similar statements lead to much larger volatility.
Subjects: 
central bank communication
Bank of Canada
semantic similarity
volatility
ARCH models
JEL: 
E43
E52
E58
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-2745-1
Document Type: 
Working Paper

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