We asked a representative sample of European banks to judge messages released by ECB members (from February 1999 to February 2000) in terms of their ambiguity. In this paper, we use our survey to derive a definition of ambiguity and to evaluate ECB communication. A Structural Vector Autoregression model is estimated and the results show that ambiguous messages were able to affect agents’ expectations for a limited period after a speech by ECB members; moreover, they show that ambiguity had temporary effects also on volatility and moved rates away from the policy rate.
M. R. Garfinkel and S. Oh, “When and How Much to Talk. Credibility and Flexibility in Monetary Policy with Private Information,” Journal of Monetary Economics, Vol. 35, No. 2, 1995, pp. 341-357.
A. Blinder, M. Ehrmann, M. Fratzcher, J. de Haan and D.-J. Jansen, “Central Bank Communication and Monetary Policy: A Survey of Theory and Evidence,” Journal of Economic Literature, 2008, Vol. 46, No. 4, pp. 910-945.
J. de Haan, S. Eijffinger and K. Rybiński, “Central Bank Transparency and Central Bank Communication: Editorial Introduction,” European Journal of Political Economy, Vol. 23, No. 1, 2007, pp. 1-8.
E. Connolly and M. Kohler, “News and Interest Rate Expectations: A Study of Six Central Banks,” In: C. Kent and S. Guttmann, Eds., The Future of Inflation Targeting, Reserve Bank of Australia, Sydney, 2004, pp. 108-134.
M. Ehrmann and M. Fratzscher, “Communication by Cen- tral Bank Committee Members: Different Strategies, Same Effectiveness?” Journal of Money, Credit, and Banking, Vol. 39, No. 2-3, 2007, pp. 509-541.