Disentangling qualitative and quantitative central bank influence

Paul Hubert (1)

1 OFCE - Observatoire français des conjonctures économiques (Sciences Po)

We aim at investigating how two different types of central bank communication affect the private inflation expectations formation process. The effects of ECB inflation projections and Governing Council members’ speeches on private inflation forecasts are identified through an Instrumental-Variables estimation using a Principal Component Analysis to generate valid instruments. We find that ECB projections have an effect on private current-year forecasts, while ECB speeches and the ECB rate impact next-year forecasts. When both communication types are interacted and go in the same direction, the inflation outlook signal tends to outweigh the policy path signal conveyed to private agents (and vice-versa).

Mots clés: European Central Bank; Monetary Policy; Central Bank Communication; ECB projections; Instrumental variables; Pincipal Component Analysis

Domaines: Economies et finances

Paul Hubert. Disentangling qualitative and quantitative central bank influence. 2014. ⟨hal-01098464⟩