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Stefano Nardelli

21 September 2021
OCCASIONAL PAPER SERIES - No. 274
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Abstract
This paper examines the importance of central bank communication in ensuring the effectiveness of monetary policy and in underpinning the credibility, accountability and legitimacy of independent central banks. It documents how communication has become a monetary policy tool in itself; one example of this being forward guidance, given its impact on inflation expectations, economic behaviour and inflation. The paper explains why and how consistent, clear and effective communication to expert and non-expert audiences is essential in an environment of an ever-increasing need by central banks to reach these audiences. Central banks must also meet the demand for more understandable information about policies and tools, while at the same time overcoming the challenge posed by the wider public’s rational inattention. Since the European Central Bank was established, the communications landscape has changed dramatically and continues to evolve. This paper outlines how better communication, including greater engagement with the wider public, could help boost people’s understanding of and trust in the Eurosystem.
JEL Code
E43 : Macroeconomics and Monetary Economics→Money and Interest Rates→Interest Rates: Determination, Term Structure, and Effects
E52 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Monetary Policy
E58 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Central Banks and Their Policies
18 March 2019
ECONOMIC BULLETIN - ARTICLE
Economic Bulletin Issue 2, 2019
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Abstract
Following the Governing Council’s decision in December 2018 to end net asset purchases under the Eurosystem’s asset purchase programme (APP), this article reviews the implementation and effects of the asset purchases. The APP has proved to be an adaptable and effective instrument to ease monetary and financial conditions, foster economic recovery, counteract disinflationary pressures and anchor inflation expectations, thereby supporting a sustained adjustment in the path of inflation towards price stability. The APP has been part of a package of policy measures together with negative interest rates on the deposit facility, forward guidance and targeted longer-term refinancing operations (TLTROs), jointly creating synergies that have enhanced the effectiveness of each of the package’s individual components. From an implementation viewpoint, the Eurosystem ensured that asset purchases were conducted smoothly and flexibly by striving for market neutrality and mitigating unintended side effects for market functioning. Whereas net asset purchases have come to an end, principal payments from maturing securities purchased under the APP will continue to be reinvested as this, together with enhanced forward guidance, provides the monetary accommodation that the Governing Council judges to be required for the continued sustained convergence of inflation to levels that are below, but close to, 2% over the medium term.
JEL Code
E52 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Monetary Policy
E58 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Central Banks and Their Policies
E44 : Macroeconomics and Monetary Economics→Money and Interest Rates→Financial Markets and the Macroeconomy
4 July 2017
WORKING PAPER SERIES - No. 2085
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Abstract
We propose a Hawkish-Dovish (HD) indicator that measures the degree of ‘hawkishness’ or ‘dovishness’ of the media’s perception of the ECB’s tone at each press conference. We compare two methods to calculate the indicator: semantic orientation and Support Vector Machines text classification. We show that the latter method tends to provide more stable and accurate measurements of perception on a labelled test set. Furthermore, we demonstrate the potential use of this indicator with several applications: we perform a correlation analysis with a set of interest rates, use Latent Dirichlet Allocation to detect the dominant topics in the news articles, and estimate a set of Taylor rules. The findings provide decisive evidence in favour of using an advanced text mining classification model to measure the medias perception and the Taylor rule application confirms that communication plays a significant role in enhancing the accuracy when trying to estimate the bank’s reaction function.
JEL Code
C02 : Mathematical and Quantitative Methods→General→Mathematical Methods
C63 : Mathematical and Quantitative Methods→Mathematical Methods, Programming Models, Mathematical and Simulation Modeling→Computational Techniques, Simulation Modeling
E52 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Monetary Policy
E58 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Central Banks and Their Policies
21 June 2017
WORKING PAPER SERIES - No. 2080
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Abstract
Monetary policy communication is particularly important during unconventional times because high uncertainty about the economy, the introduction of new policy tools and possible limits to the central bank’s toolkit could hamper the predictability of policy actions. We study how monetary policy communication should and has worked under such circumstances. Our main results relate to announcements of asset purchase programmes and the use of forward guidance. We show that announcements of asset purchase programmes have lowered market uncertainty, particularly when accompanied by a contextual release of implementation details such as the envisaged size of the programme. We also show that forward guidance reduces uncertainty more effectively when it is state‐contingent or when it provides guidance about a long horizon than when it is open‐ended or covers only a short horizon, and that the credibility of forward guidance is strengthened if the central bank also has embarked on an asset purchase programme.
JEL Code
E43 : Macroeconomics and Monetary Economics→Money and Interest Rates→Interest Rates: Determination, Term Structure, and Effects
E52 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Monetary Policy
E58 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Central Banks and Their Policies
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Discussion papers
23 December 2008
WORKING PAPER SERIES - No. 987
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Abstract
In this paper the probability of informed trading (PIN) model developed by Easley and O'Hara (1992) is applied to analyze the role and impact of heterogeneities in euro overnight unsecured market. The empirical assessment of the functioning of this market is based on the PIN which measures the ability of traders to interpret signals on the expected evolution of the overnight rate. Results show that between 2000 and 2004 a heterogeneous learning process of market mechanisms within participants could be observed, whereas such asymmetries have been sharply decreasing since 2005. This is reviewed against some significant events that occurred in the euro money market, such as the reform of the Eurosystem's operational framework in March 2004 and the recent financial market turmoil, which has represented a break in the steady decline of asymmetries as evidence suggest.
JEL Code
G14 : Financial Economics→General Financial Markets→Information and Market Efficiency, Event Studies, Insider Trading
E52 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Monetary Policy
Network
ECB workshop on the analysis of the money market