the institutions of monetary policy it is a great honor to be invited by this year s president elect marty feldstein to deliver the ely lecture marty has been my teacher mentor colleague and friend for over 30 years and i never cease to be amazed by the energy and imagination which he devotes to the study of economic problems i got to know marty during my time as a kennedy scholar at harvard in 1971 the kennedy scholarships form one part of britain s national memorial to president john f

inconsistent voting behaviour in the fomc this article uses transcript data to examine determinants of inconsistent voting behaviour in the federal open market committee fomc in the period 1989 2008 inconsistent voting behaviour occurs

central bank design abstract starting with a blank slate how could one design the institutions of a central bank for the united states this paper explores the question of how to design a central bank drawing on the relevant economic literature and historical experiences while staying free from concerns about how the fed got to be what it is today or the short term political constraints it has faced at various times the goal is to provide an opinionated overview that puts forward the trade offs associated with different choices and identifies areas where there are clear messages about optimal central bank design

evaluating the economic impact of international remittances on developing countries using household surveys a literature review abstract this literature review covers 50 recent empirical studies of the economic impact of international remittances on the developing world that are based on household survey data it begins by reviewing the considerable methodological problems confronting economic work on international remittances and then examines the strengths and weaknesses of various economic studies of the impact of remittances in the developing world on such outcomes as poverty and inequality health and education investment and savings labour supply and participation and economic growth it finds that while international remittances generally have a positive impact on poverty and health in the developing world remittances can have negative effects on labour supply education and economic growth

quantitative easing and the uk stock market does the bank of england information dissemination strategy matter we use intraday aggregate stock market data and an event study framework to assess the uk s equity market reaction to the unexpected element of the bank of england monetary policy committee s mpc asset purchase announcements for the 2009 2017 period we assess the reactions of equity returns and their volatility over various time frames both preceding and following the mpc announcements our results show that the uk unconventional monetary policy shocks have a significant impact on domestic equity returns and volatilities the strength of this impact depends on the bank s information dissemination through inflation reports and the publication of the mpc s voting records jel g14 e44 e52

the fed and the stock market an identification based on intraday futures data this article develops a new identification procedure to estimate the contemporaneous relation between monetary policy and the stock market within a vector autoregression var framework the approach combines high frequency data from the futures market with the var methodology to circumvent exclusion restrictions and achieve identification our analysis casts doubt on var models imposing a recursive structure between innovations in policy rates and stock returns we find that a tightening in policy rates has a negative impact on stock prices and that the federal reserve fed has responded significantly to movements in the stock market estimates are robust to various model specifications

monetary policy committees individual and collective reputations this paper looks at the incentives of individual members of a monetary policy committee to gain a reputation for inflationary toughness i show a policy maker can have more or less incentive to build a reputation when part of a group but group policy making leads to higher expected social welfare not publishing individuals votes raises the temptation to inflate and lowers expected social welfare if the culture or rules of a central bank puts more weight on senior policy makers the incentive to build a reputation is greater but expected social welfare may be higher or lower

asymmetric effects of federal funds target rate changes on s p100 stock returns volatilities and correlations we study the effects of fomc announcements of federal funds target rate decisions on individual stock returns volatilities and correlations at the intraday level for all three characteristics we find that the stock market responds differently to positive and negative target rate surprises first the average response to positive surprises that is bad news for stocks is larger second in case of bad news the mere occurrence of a surprise matters most whereas for good news its magnitude is more important these new insights are possible due to the use of high frequency intraday data

remittances bonds and bridges remittances and social capital in burundi abstractthis study explores the effects of remittances on households structural social capital in urban burundi distinctions are made between bonding and bridging social capital referring to intra versus inter network ties of family members and friends the results demonstrate that remittance receiving households invest more in bridging social capital by participating in organisations donating time but make fewer monetary contributions compared to non receiving households remittances have mixed effects on bonding social capital receiving households give significantly less gifts to family members and friends but are more likely to send internal remittances compared to non receivers the implications of these findings for post conflict development are discussed

monetary policy signaling and movements in the term structure of interest rates this paper examines how various monetary policy signals such as repo rate changes inflation reports speeches and minutes from monetary policy meetings affect the term structure of interest rates we find that unexpected movements in the short end of the yield curve are mainly driven by unexpected changes in the repo rate however published inflation reports and speeches also have some impact on short rates speeches are found to be a more important determinant for the longer end of the term structure our conclusion is that central bank communication is an essential part of the conduct of monetary policy

do as i do and also as i say monetary policy impact on brazil s financial markets we analyze how brazilian financial markets in particular interest rate futures react to monetary policy in terms of both deeds that is changes in the policy rate and words that is central bank communication using daily data from 2005 to 2014 we find that interest futures rates react in the expected direction to both the central bank s actions and its words futures rates rise fall after both an increase decrease in the reference interest rate and a hawkish dovish communication by the central bank of brazil we also find that the central bank s words create noise since they increase the volatility of futures rates our analysis further reveals that the effectiveness of monetary policy communication increased after the 2008 international crisis as measured by its larger impact on future rates and reduced volatility at the same time deeds became less relevant the effect of changes in the central bank s policy rate on futures rates declined

price formation and liquidity in the u s treasury market the response to public information the arrival of public information in the u s treasury market sets off a two stage adjustment process for prices trading volume and bid ask spreads in a brief first stage the release of a major macroeconomic announcement induces a sharp and nearly instantaneous price change with a reduction in trading volume demonstrating that price reactions to public information do not require trading the spread widens dramatically at announcement evidently driven by inventory control concerns in a prolonged second stage trading volume surges price volatility persists and spreads remain moderately wide as investors trade to reconcile residual differences in their private views how do financial markets form prices and provide liquidity when information arrives efforts to address this issue have led to an extensive microstructure literature on equity markets and to a lesser extent on the foreign exchange fx market relatively little work has focused on the u s treasury market however in spite of its importance in its own right and the advantages it offers as an alternative testing ground for microstructure hypotheses

does the currency board matter us news and argentine financial market reaction using a generalized autoregressive conditional heteroscedasticity garch model we study the effects of the us monetary policy and macroeconomic announcements on argentine money stock and foreign exchange markets over the period january 1998 to july 2007 we show first that both types of news have a significant impact on all markets second there are noticeable differences in reaction for different subsamples argentine money markets were more dependent on us news under the currency board than after it was abandoned as the floating exchange rate partly absorbs spillover effects from the us finally we find that the us dollar denominated assets react less to us news than peso denominated assets which suggests that the currency board was not completely credible during its final years

forecast dispersion dissenting votes and monetary policy preferences of fomc members the role of individual career characteristics and political aspects using data from 1992 to 2001 we study the impact of members economic forecasts on the probability of casting dissenting votes in the federal open market committee fomc employing standard ordered probit techniques we find that higher individual inflation and real gdp growth forecasts relative to the committee s median significantly increase the probability of dissenting in favor of tighter monetary policy whereas higher individual unemployment rate forecasts significantly decrease it using interaction models we find that fomc members with longer careers in government industry academia non governmental organizations ngos or on the staff of the board of governors are more focused on output stabilization while fomc members with longer careers in the financial sector or on the staffs of regional federal reserve banks are more focused on inflation stabilization we also find evidence that politics matters with republican appointees being much more focused on inflation stabilization than democratic appointees moreover during the entire clinton administration natural monetary policy preferences of bank presidents and board members for inflation and output stabilization were more pronounced than under periods covering the administrations of both george h w bush and george w bush respectively

should central bankers talk to the foreign exchange markets in this paper we study the role of official statements and speeches given by central bank authorities in charge of foreign exchange policy we investigate the impact of statements that comment on and confirm such interventions on the day of the intervention on the two major foreign exchange markets over an extended period 1989 2003 we also study the impact in terms of policy effectiveness of central bank communication before the actual operations our results suggest that appropriate speeches clarifying the current intervention policy can have marginally virtuous effects both in terms of exchange rate level and exchange rate volatility this leads us to conclude that in general actual interventions on the market should still be employed provided that official statements are used to clarify the nature and purpose of these interventions c 2008 elsevier ltd all rights reserved

remittances and household wealth after conflict a case study on urban burundi few studies have researched the use of remittances in conflict affected contexts this study analyzes unique data from burundi testing three hypotheses relative deprivation investment and insurance derived from new economics of labor migration studies employing propensity score matching results show that remittances are common among wealthier households rejecting the relative deprivation hypothesis remittances have strong effects on non productive assets such as living conditions and food security and weak effects on productive assets such as asset ownership poorer households invest mostly in non productive assets suggesting that remittances are insurance for the poor whereas wealthier households seem largely unaffected by remittances

quit behavior under imperfect information searching moving learning the paper provides a search theoretic interpretation of a well known empirical regularity the inverse relationship between quit rates and job tenure we consider a setting where the employed job searcher has incomplete information about non wage job attributes at the time acceptance decisions are made hence jobs will be accepted or refused without full knowledge of the value of the offers the model implies that workers with long tenure will be less likely to quit holding wage rates constant we also show that a risk neutral worker is willing to accept a wage offer that falls below his current full wage in the absence of moving costs

simultaneous monetary policy announcements and international stock markets response an intraday analysis abstract this paper investigates the return and volatility response of major european and us equity indices to monetary policy surprises by utilizing extensive intraday data on 5 min price quotes along with a comprehensive dataset on monetary policy decisions and macroeconomic news announcements the results indicate that the monetary policy decisions generally exert immediate and significant influence on stock index returns and volatilities in both european and the us markets the findings also show that press conferences held by the european central bank ecb that follow monetary policy decisions on the same day have a clear impact on european index return volatilities this implies that they convey additional important information to market participants overall our analysis suggests that the use of high frequency data is critical to separate the effect of monetary policy actions from those of macroeconomic news announcements on stock index returns and volatilities

a theory of ambiguity credibility and inflation under discretion and asymmetric information this paper develops a positive theory of credibility ambiguity and inflation under discretion and asymmetric information the monetary policymaker maximizes his own politically motivated objective function that is positively related to economic stimulation through monetary surprises and negatively related to monetary growth the relative importance he assigns to each target shifts stochastically through time his current preference trade off is known to him but not to the public when choosing the state contingent path of money growth for the present and the future the policymaker compares the benefits from current stimulation with the costs associated with higher future inflation expectations current monetary growth conveys information to the public about future money growth because there is persistence in the policymaker s objectives although expectations are rational information is imperfect because monetary control procedures are imprecise as a result the public cannot correctly distinguish persistent changes of emphasis on different policy objectives from transitory monetary control errors the public becomes aware of changes gradually by observing past monetary growth credibility is defined in terms of the speed with which the public recognizes changes in the objectives of the policymaker credibility is lower the noisier monetary control and the more stable the objectives of the policymaker looser monetary control and a higher degree of time preference on the part of the policymaker induce him to produce higher and more variable monetary growth when the policymaker is free to determine the accuracy of monetary control he does not always choose the most effective control available in spite of the fact that monetary surprises always have an expected value of zero the reason is that ambiguous control procedures enable the policymaker to generate positive surprises when he cares more than on average about economic stimulation he leaves the inevitable negative surprises for periods in which he cares more about inflation prevention this result provides an explanation for the fed s preference for ambiguity recently documented by goodfriend 1986 the policymaker is more likely to pick more ambiguous control procedures the more uncertain his objectives and the higher his time preference the paper also provides a theoretical underpinning for the well documented crosscountry positive correlation between the level and the variability of inflation

wages nonwage job characteristics and labor mobility this paper examines the effects of a set of nonwage job characteristics on the quit decisions of young and middle aged men the data set was constructed by merging data in the national longitudinal surveys of young and mature men with data from the dictionary of occupational titles file and the bureau of economic analysis file on fringe benefits the empirical analysis shows that some nonwage job attributes have significant influence on worker quit behavior and that there are important differences in the effects of the nonwage job characteristics across age groups young men are significantly more likely than older men to quit repetitive jobs for example whereas the presence of bad working conditions is a more important factor in the quit decisions of the older cohort the results also indicate that for the older men fringe benefits have a stronger effect on quit decisions than wages do further evidence on age differences is provided through an analysis of panel data from the quality of employment survey since the time of adam smith the theory of equalizing differences that individuals are induced to accept less attractive jobs by receiving compensating increases in their wages has been used by economists to explain the existence of wage differences in the labor market by definition the theory has important implications for understanding the mobility of labor since an individual s decision to change jobs is based on all the characteristics of a job the wage rate fringe benefits and nonpecuniary job at

does central bank communication signal future monetary policy in a post crisis era the case of the ecb abstract we examine the european central bank s ad hoc communication and explore how it informs future monetary policy decisions using the rich dataset of the inter meeting verbal communication by the members of the european central bank s governing council between 2008 and 2016 we construct a measure of communication evaluating its inclination towards easing tightening or maintaining the monetary policy stance we find that this measure provides useful additional information about future monetary policy decisions even when we control for market based interest rate expectations and lagged decisions our results also suggest that in particular communication related to conventional measures and or by the ecb president explain the future ecb rate changes well all aforementioned results hold also in the environment of the zero lower bound overall these results point to the importance of transparent communication in understanding the future course of monetary policy

has ecb communication been helpful in predicting interest rate decisions an evaluation of the early years of the economic and monetary union we examine the usefulness of communication by the european central bank for predicting its policy decisions during the early years of the european economic and monetary union using ordered probit models based on the taylor rule we find that statements on the main refinancing rate and future inflation are significantly related to interest rate decisions at the same time an out of sample evaluation shows that communication based models do not outperform models based on macroeconomic data in predicting decisions both types of models have difficulty in predicting changes in the main refinancing rate

agreement matters opec announcement effects on wti term structure abstract we investigate the relationships between different types of opec announcements and term structure variables level slope and curvature for wti crude oil futures we find that agreements to increase decrease production are positively negatively associated with changes in oil price levels in futures markets this finding is consistent with recent research for the first time in the literature we evaluate announcements which signify no change in production quotas in particular a no change announcement may be due to a unanimous agreement to maintain quotas unchanged or it may be due to a failure to agree on a change in quotas we find the term structure effects on slope and curvature of the two types of announcement to be statistically significantly different from each other our results suggest that markets are more optimistic following agreements to maintain production and more cautious following a failure to agree

is the central bank s publication of economic forecasts influential abstract we examine how a central bank s economic forecasts affect forecasts by professional forecasters and vice versa results show that while central bank forecasts are not significantly influenced by those of professional forecasters the latter are however notably affected by the former

words are not all created equal a new measure of ecb communication we develop a field specific dictionary to measure the stance of the european central bank ecb monetary policy dovish neutral hawkish and the state of the eurozone economy positive neutral negative through the content of ecb press conferences in contrast with traditional textual analysis we propose a novel approach using term weighting and contiguous sequence of words n grams to better capture the subtlety of central bank communication we find that quantifying ecb communication using our field specific weighted lexicon helps to explain future ecb monetary decisions when considering an augmented taylor rule regarding european stock market volatility we find that markets are more less volatile on the day following a conference with a negative positive tone about the euro area economic outlook our indicators significantly outperform a textual classification based on the loughran mcdonald or apel blix grimaldi dictionaries and a media based measure of economic policy uncertainty

on the long term effectiveness of exchange rate communication and interventions abstract exchange rate communication has come to play an increasingly important role as a policy tool for monetary authorities over the past decade the paper assesses the strategies and the long term effectiveness of communication as well as actual interventions the empirical results for the g3 economies indicate that communication has not only exhibited a significant contemporaneous effect on exchange rates but also has moved forward exchange rates up to a horizon of 6 months in the desired direction moreover communication is found to reduce exchange rate volatility and uncertainty whereas actual interventions tend to raise it overall this underlines a key difference between these two policy tools and suggests that communication tends to be a fairly effective policy tool over the medium term

a structural dynamic analysis of job turnover and the costs associated with moving to another job this paper provides an empirical analysis of the labor market behavior of employed individuals using a structural on the job search model the costs associated with moving to another job are allowed to be nonzero and may depend on the wage level it is shown that under certain conditions the optimal strategy has the reservation wage property the model is estimated using data on job durations and subjective responses concerning the search strategy the results reveal some strong sources of inflexibility of the labor market copyright 1992 by royal economic society

starting from a blank page semantic similarity in central bank communication and market volatility abstract central banks often draft press releases announcing monetary policy decisions starting from the previous release this makes it straightforward to see how the content has evolved but may make substantial updates harder to interpret as markets learn to expect only minor updates using variation in the drafting process at the bank of canada this paper finds that similar press releases reduce market volatility whereas volatility rises when substantial changes occur after sequences of similar statements a comparison over time and across central banks shows that market sensitivity to similarity adjusts to the drafting practice of central banks

the inequality of social capital and the reproduction of chronic poverty summary this paper draws on ethnographic research in tanzania to question ideas inherent to mainstream development policy that building social capital can be readily created used or substituted for other missing assets and thereby overcome poverty the poorest experience clusters of interlocking disadvantage that make it highly unlikely that they can draw on social capital to ameliorate their poverty or that increased association and participation at community level is necessarily beneficial to them moreover social relationships collective action and local institutions may structurally reproduce the exclusion of the poorest as such a politically neutral and undersocialized policy focus on strengthening associational life and public participation of the poor is unlikely to lead to their greater inclusion nor to significant poverty alleviation

changes in uk monetary policy rules and discretion in practice abstract in october 1992 following sterling s departure from the exchange rate mechanism britain adopted a new framework for monetary policy that comprised two components first an explicit target for inflation and second institutional changes designed to give greater influence to the bank of england by increasing the transparency and openness of the process by which interest rates are set this paper analyses those changes from the perspective of the debate on rules versus discretion and argues that an appropriate design of institutional arrangements can provide incentives for central bankers to pursue the first best state contingent monetary policy

monetary transmission mechanism in central and eastern europe surveying the surveyable this paper surveys recent advances in empirical studies of the monetary transmission mechanism mtm with special attention to central and eastern europe cee our results indicate that the strength of the exchange rate pass through substantially declined over time mainly due to a fall in inflation rates and to some extent due to the so called composition effect the asset price channel is weak and is likely to remain weak because of shallow stock and private bond markets and because of low stock and bond holdings of domestic household house prices may become an exception with higher levels mortgage lending and with high owner occupancy ratios while the credit channel could be a powerful channel of monetary transmission as new funds raised on capital markets are close to zero in cee it is actually not as both commercial banks and non financial corporations can escape domestic monetary conditions by borrowing from their foreign mother companies the moderately good news is however that those banks and firms are influenced by monetary policy in the euro area because their parent institutions are themselves subjected to the credit channel in the euro area

who should be interviewed in surveys of household income summary this study tests the null hypothesis that it is sufficient to interview only the household head to obtain accurate information on household income results show that using a husband s estimate of his wife s income does not produce statistically reliable results for poverty analysis estimates of the wife s income provided by the husband and wife are in agreement in only 6 of households while limiting interviews to one person has the advantage of reducing the time and expense of household surveys this appears detrimental in terms of accuracy and may lead to incorrect conclusions on the determinants of poverty

are two heads better than one monetary policy by committee two experiments were conducted to test the common hypothesis that groups make decisions more slowly than individuals one of these experiments imitates real life monetary policy decisions in both cases the hypothesis is found wanting groups are not slower than individuals in both experiments we also find that group decisions are on average better than individual decisions this holds regardless of whether the groups make decisions by unanimity or majority rule simple mechanical theories of group decisionmaking that the group follows its average player median player or best player do not explain the results group interactions seem to matter

central bank communication and monetary policy a survey of theory and evidence over the last two decades communication has become an increasingly important aspect of monetary policy these real world developments have spawned a huge new scholarly literature on central bank communication mostly empirical and almost all of it written in this decade we survey this ever growing literature the evidence suggests that communication can be an important and powerful part of the central bank s toolkit since it has the ability to move financial markets to enhance the predictability of monetary policy decisions and potentially to help achieve central banks macroeconomic objectives however the large variation in communication strategies across central banks suggests that a consensus has yet to emerge on what constitutes an optimal communication strategy

communication by central bank committee members different strategies same effectiveness the paper assesses the communication strategies of the federal reserve the bank of england and the european central bank and their effectiveness we find that the effectiveness of communication is not independent from the decision making process the paper shows that the federal reserve has been pursuing a highly individualistic communication strategy amid a collegial approach to decision making while the bank of england is using a collegial communication strategy and highly individualistic decision making the european central bank ecb has chosen a collegial approach both in its communication and in its decision making assessing these strategies we find that predictability of policy decisions and the responsiveness of financial markets to communication are equally good for the federal reserve and the ecb this suggests that there may not be a single best approach to designing a central bank communication strategy

the high frequency response of the eur usd exchange rate to ecb communication we investigate the impact of the european central bank s monetary policy communication during the press conference held after the monthly governing council meeting on the eur usd exchange rate in high frequency based on the method of content analysis we construct communication indicators for the introductory statement and find that communication with respect to future price developments is most relevant in response to statements about increasing risks to price stability the eur appreciates on impact to the contrary communication about economic activity and monetary aggregates does not generate significant exchange rate reactions

federal reserve information and the behavior of interest rates this paper tests for the existence of asymmetric information between the federal reserve and the public by examining federal reserve and commercial inflation forecasts it demonstrates that the federal reserve has considerable information about inflation beyond what is known to commercial forecasters it also shows that monetary policy actions provide signals of the federal reserve s information and that commercial forecasters modify their forecasts in response to those signals these findings may explain why long term interest rates typically rise in response to shifts to tighter monetary policy jel e52 e43 d82 asymmetric information between the federal reserve and the public is a phenomenon that is often posited but rarely tested numerous models of central bank behavior for example show that the existence of asymmetric information has important implications for the effectiveness of policy and the consequences of dynamic inconsistency yet there

legal minimum wages and employment duration 1 introductionthe effect of a legal minimum wage on employee turnover is an important consideration when evaluating the effectiveness of a minimum wage policy if an increase in the minimum wage results in greater turnover then firms hiring costs are increased and the direct benefit to workers who are paid the minimum wage may be lessened a reduction in turnover on the other hand would mean more stability for employers and workers though access to minimum wage jobs may be reduced for job seekers despite the recent proliferation of studies on the effects of legal minimum wages their impact on turnover has received relatively little attention from economists this may be due to the fact that much of the literature focuses on the teen labor market where there is more churning than in the adult labor market gardecki and neumark 1998 the fact remains however that a significant proportion of workers hired at the minimum wage are adults and the effects of the minimum wage onthe turnover hazard are understudied 1standard economic theory suggests that a price floor such as a minimum wage results in fewer transactions and in rents for those suppliers who manage to sell in the context of the labor market this means workers in minimum wage jobs may be expected to receive rents and therefore may be less likely to quit another possible consequence of a minimum wage arises from imperfect information in the labor market combined with heterogeneity among workers and jobs prior to the start of an employment relationship the worker does not know all the relevant aspects of the job and the employer does not know all the important characteristics of the worker as a result in the absence of a mandated minimum wage job applicants may use wage offers to infer information about the nonpecuniary aspects of jobs thereby facilitating the matching process a binding minimum wage compresses the wage distribution so that a single wage is associated with a larger array of jobs this means that the wage offer becomes a poor indicator of a job s nonwage characteristics which leads to a higher proportion of poor matches and consequently more turnover this paper uses data on young men and women in the 1988 1994 rounds of the national longitudinal survey of youth nlsy to estimate the relationship between the minimum wage and the turnover hazard the extent to which the minimum wage binds varies across states both because of differences in state laws and because of differences in wage levels across states we exploit this variation to estimate turnover hazards as a function of the ratio of the nominal minimum wage to the state median wage this variable measures the extent to which the minimum wage binds we find some evidence that in states where the minimum wage is low relative to the state s median wage men hired at the minimum wage have lower employee initiated separation hazards than other low wage workers as the minimum wage rises relative to the prevailing median wage that is as the minimum wage becomes more binding men hired at the minimum wage are increasingly likely to leave their jobs at any given duration when the minimum wage is high relative to the median wage we find that men hired at the minimum wage have significantly higher employee initiated separation hazards than other low wage workers we interpret these findings as evidence that while rents may accrue to minimum wage workers the job matching process is undermined when the minimum wage binds our results apply to the men in our sample but not to the women indeed for women we find no connection between employment duration and the starting wage rate though we do uncover some evidence that for women in low wage jobs employment duration is more elastic with respect to the presence of family friendly fringe benefits than it is for men the paper proceeds as follows the next section explores the possible reasons minimum wages would affect turnover and discusses the existing empirical and theoretical research on this topic

communication and monetary policy recent trends toward greater central bank independence and the adoption of formal inflation targeting by several countries have served to emphasize the importance of communication policy in this paper we explore some of the economic effects of public information that arise whenever public information serves the dual role of conveying fundamental information as well as serving as a focal point for better coordination more precise public information is a double edged tool while it is very effective in influencing actions through coordination sometimes it can be too effective and coordinate actions away from fundamentals copyright 2002 oxford university press

the euro exchange rate during the european sovereign debt crisis dancing to its own tune abstract this paper studies the determinants of the euro exchange rate volatility during the european sovereign debt crisis allowing a role for macroeconomic fundamentals policy actions and the public debate by policy makers it finds that the euro exchange rate mainly danced to its own tune with a particularly low explanatory power for macroeconomic fundamentals the findings of the paper also suggest that financial markets might have been less reactive to the public debate by policy makers than previously feared still there are instances where exchange rate volatility increased in response to news such as on days when several politicians from aaa rated countries went public with negative statements suggesting that communication by policy makers at times of crisis should be cautious about triggering undesirable financial market reactions

development and social capital abstract this paper examines social capital and its relation with economic development we focus on the role that interpersonal relationships play in social exchange whether through the market or through the provision of public goods by facilitating search and trust social capital can increase the efficiency of social exchange where formal institutions are weak but the benefits from social capital are likely to be unequally distributed given these features documenting empirically the benefits of social capital is complicated by the presence of negative and positive externalities and by the existence of leadership and group effects lessons for development policy are drawn at the end

a general theory of controllability and expectations anchoring for small open economies abstract rational expectations are often used as an argument against policy activism as they may undermine or neutralize the policymaker s actions although this sometimes happens rational expectations do not always imply policy invariance or ineffectiveness in fact in certain circumstances rational expectations can enhance our power to control an economy over time in those cases policy announcements can be used to extend the impact of conventional policy instruments we present a general forward looking policy framework and use it to provide a formal rationale for testing when policymakers can and cannot expect to be able to manage expectations to describe the relevance of our results applications are shown for policy design in small open economies those are the cases where domestic policies are at their weakest and our ability to influence expectations most constrained

quits and race previous studies estimate that black quit rates are lower than those of whites this paper suggests that these estimates under state black quit propensities because they neglect racial differences in quit responses to commuting time and local unemployment rates ignoring these differences the black quit effect appears to be negative controlling for them the residual race effect is positive and sufficiently large to account for all net black quits

central bank communication in the financial crisis evidence from a survey of financial market participants in this paper we investigate the relationship between market participants perception of central bank communication and their evaluation of central banks i credibility ii unorthodox measures and iii independence we utilise a survey of more than 550 financial market participants from around the world who answered questions in reference to the bank of england boe the bank of japan boj the european central bank ecb and the federal reserve fed we find that market participants believe that the fed communicates best followed by the boe ecb and boj similar rankings are found on the issues of credibility satisfaction with unconventional monetary policy and level of independence using ordered probit models we show that perception of central bank communication is positively related to i evaluation of central bank credibility ii satisfaction with unorthodox measures and iii perceived level of central bank independence

the impact of ecb monetary policy decisions and communication on the yield curve we use intraday changes in money market rates to construct indicators of news about monetary policy stemming separately from policy decisions and from official communication of the european central bank and study their impact on the yield curve we show that communication may lead to substantial revisions in expectations of monetary policy and at the same time exert a significant impact on interest rates at longer maturities thereby the maturity response pattern to communication is hump shaped whereas that to policy decisions is downward sloping jel e43 e58

the validity of the event study approach evidence from the impact of the fed s monetary policy on us and foreign asset prices this paper documents the effects of changes in us monetary policy on asset prices in 51 countries to evaluate the validity of the event study approach we find that the event study estimates contain a significant bias however this bias is fairly small and the ordinary least squares approach tends to outperform in an expected squared error sense the heteroscedasticity based estimator for both small and large sample sizes hence in general the event study methodology should be preferred moreover we show that us monetary policy has been an important determinant of global financial markets

monetary policy surprises and interest rates evidence from the fed funds futures market abstract this paper estimates the impact of monetary policy actions on bill note and bond yields using data from the futures market for federal funds to separate changes in the target funds rate into anticipated and unanticipated components interest rates response to anticipated target rate changes is small while their response to unanticipated changes is large and highly significant these responses are generally consistent with the expectations hypothesis of the term structure surprise target rate changes have little effect on expectations of future actions however which helps to explain the lack of empirical support for the expectations hypothesis at the short end of the yield curve

the new economics of labor migration this paper reviews selected theoretical and empirical developments in the field of labor migration economics the migration behavior of individuals differs in accordance with their perceived relative deprivation those who are relatively more deprived tend to have stronger incentive to migrate than those who are relatively less deprived moreover a reference group characterized by more income inequality is likely to generate more relative deprivation highly skilled workers are also more likely to migrate migration decisions are often made jointly by the migrant and nonmigrant with a contractual arrangement regarding the sharing of costs and returns the exchange of commitments to share income provides coinsurance of particular interest are the determinants of the speed of adoption of migration as an innovation and the characteristics associated with the delay in the adoption of innovation new econometric techniques including techniques for the analysis of qualitative dependent variables techniques that correct for sample selection bias and those for the analysis of longitudinal data have substantially benefited empirical research in this area new methods that can correct for the biased estimate of the wages particular individuals would receive at 2 or more locations at the same point in time allow researchers to test locational decsion making models estimates of these structural models of labor migration support the hypothesis that individuals respond to income incentives in making the decsion to migrate further research is needed on the pazzling observation that migrant workers earn less than native born workers with similar characteristics during the 1st few years after migration but more thereafter other topics that need further research include the macroeconomic effects of migration the microeconomic and macroeconomic relationships between aging and labor migration and the migration behavior of dual earner families

oral interventions versus actual interventions in fx markets an event study approach the article assesses whether exchange rate communication or oral intervention has been an effective policy tool for monetary authorities to influence exchange rates it employs an event study methodology that identifies intervention clusters or events for the euro dollar and the dollar yen exchange rates the article finds that both oral intervention events and actual intervention events have been highly successful over the short to medium run the article shows that the success of intervention events is related to market conditions and to the coordination among policy makers it also finds that the success of communication and actual interventions is largely unrelated to monetary policy thus suggesting that interventions primarily function through a coordination channel

the response of term rates to fed announcements in february 4 1994 the federal reserve began the practice of announcing changes in the targeted level for the federal funds rate immediately after such decisions were made this paper investigates to what extent the policy of the announcement affected a key ingredient in the monetary transmission mechanism the term structure of nominally risk free treasury securities we find that term rates react much more in unison during announcement days than at any other time moreover the practice of circumscribing almost all changes in the federal funds rate target to federal open market committee fomc meeting dates regiments the formation of market expectations in the overnight rate and the price discovery process of term rates thus facilitating the fed s goal of controlling long term rates

does money matter abstract the desire to attain personal wealth has long been regarded as the foremost motive for entrepreneurship other goals and values however may also contribute to entrepreneurial motivation thus the extent to which money matters relative to other motives is an empirical question in this study we examine the role of wealth as the motive for the decision to found new ventures three focal questions guide our research 1 does money matter more relative to other decision dimensions in deciding to start a new high technology venture 2 does money matter more to entrepreneurs compared to non entrepreneurs and 3 does money matter in absolute terms that is does a decision model that focuses solely on the motive of wealth attainment parsimoniously predict entrepreneurs start up decisions we conducted in depth interviews with 51 entrepreneurs and a control group of 28 senior managers who decided not to start ventures non entrepreneurs in the high technology industry in british columbia to address our research questions the motives we examined are wealth attainment and an aggregate of other dimensions identified by entrepreneurs and managers we considered three components of values participants ratings of the importance of various decision dimensions their rating of the salience of these dimensions and their satisfaction with prior levels of attainment on those decision dimensions we assessed beliefs as participants perceived probability of attaining their desired level of a particular decision dimension in each of three alternatives the position held at the time the venture decision was made the venture itself and the next best career alternative at that time the data were analyzed to compare entrepreneurs values and beliefs regarding wealth with an aggregate of other decision dimensions our relative hypotheses and with those of non entrepreneurs our comparative hypotheses our findings do not support the common perception that money is the only or even the most important motive for entrepreneurs decisions to start new ventures wealth attainment was significantly less important to entrepreneurs relative to an aggregate of 10 other decision dimensions and entrepreneurs did not rate wealth as any more important than did non entrepreneurs non entrepreneurs rated wealth as no more important than other motives wealth attainment was also significantly less salient to entrepreneurs decisions to venture than were other motives non entrepreneurs reported that wealth was significantly more salient to their decision against founding a venture than other dimensions in fact non entrepreneurs rated wealth attainment as significantly more salient to their decision against founding than entrepreneurs rated it for their decision to proceed with starting a high technology business a significant number of entrepreneurs started businesses even when they believed that doing so offered them a lower probability of obtaining their most desired level of wealth than did one of their other alternatives satisfaction ratings and stated beliefs also dispute classical predictions just prior to making the decision to venture the entrepreneurs in our study were as satisfied with wealth as they were with other decision dimensions the non entrepreneurs were actually more satisfied with wealth attainment than with other dimensions a comparison of the groups revealed no difference in satisfaction with wealth attainment levels entrepreneurs did believe that their chances of attaining their desired level of wealth were much greater through founding a new high technology venture than through their other alternatives this difference in beliefs however was not significantly greater than their optimistic beliefs about chances of attaining desired levels of other dimensions it was significantly higher compared to the non entrepreneurs belief difference measures for wealth in fact the entrepreneurs stated beliefs regarding the chances of attaining their desired levels of all dimensions were higher than those of the non entrepreneurs suggesting that entrepreneurs were simply more optimistic at the time of their decision than non entrepreneurs salience findings suggest that these optimistic beliefs about wealth did not motivate the founding decision alone we can distinguish those people who successfully started ventures by their regard for wealth as a less salient factor and their beliefs in higher chances of a venture producing monetary and other returns other motives such as innovation vision independence and challenge were more important and much more salient to this sample of entrepreneurs our findings have implications for practice teaching and research venture capitalists who partially base their assessment of entrepreneurs on the extent to which they are motivated to make a great deal of money may benefit from reconsideration of this criterion we have evidence of one group of high technology entrepreneurs who achieved success without placing much decision weight on attainment of personal wealth nascent entrepreneurs and those who teach entrepreneurship can use this empirical finding to argue two main points 1 not all entrepreneurs found a business for personal wealth reasons and 2 one need not be motivated by personal wealth attainment to be a successful entrepreneur similarly theoretical models that assume money is the primary motive for entrepreneurial activity require re examination future research in entrepreneurship should focus less on wealth attainment and more on other motives for the venturing decision a multiple attribute decision model may be able to more fully explain venturing decisions

daily pricing of emerging market sovereign cds before and during the global financial crisis abstract in this paper we study the determinants of daily spreads for emerging market sovereign credit default swaps cdss over the period april 2002 december 2011 using garch models we find first that daily cds spreads for emerging market sovereigns are more related to global and regional risk premia than to country specific risk factors this result is particularly evident during the second subsample august 2007 december 2011 where neither macroeconomic variables nor country ratings significantly explain cds spread changes second measures of us bond equity and cdx high yield returns as well as emerging market credit returns are the most dominant drivers of cds spread changes finally our analysis suggests that cds spreads are more strongly influenced by international spillover effects during periods of market stress than during normal times

the reaction of asset markets to swiss national bank communication abstract in this paper we analyze high frequency movements in swiss asset markets in reaction to real time communication by the swiss national bank our analysis of central bank communication encompasses monetary policy announcements speeches and interviews we examine the reactions of the currency market the bond market and the stock exchange the evidence suggests that speeches and interviews along with monetary policy announcements engender a significant price reaction this paper sheds light on the relevance of communications other than monetary policy announcements

dispersed communication by central bank committees and the predictability of monetary policy decisions the paper asks whether members of central bank decision making committees should communicate with the public in a collegial manner by conveying the consensus or majority view of the committee or in an individualistic way by providing the diversity of views among the committee members it finds that more active as well as more consistent communication by committee members improves the predictability of monetary policy decisions significantly this effect is sizeable as communication dispersion across committee members accounts on average for one third to one half of the market s prediction errors of fomc policy decisions moreover more active and more consistent communication are found to also reduce the degree of uncertainty about the future path of interest rates these findings suggest that a collegial communication which stresses the consensus view on policy inclinations can enhance the effectiveness of central bank communication

does foreign exchange intervention matter the portfolio effect until recently there was an unusual degree of consensus among economists that intervention by central banks in the foreign exchange market did not offer an effective or lasting instrument for affecting the exchange rate at least not independently of monetary policy this consensus was largely shared among policymakers and participants in the financial markets as well the 1982 g 7 economic summit at versailles commissioned a study of intervention known as the jurgenson report which found that the effects were small and transitory at most we think that the time is ripe for new statistical testing of the question many policymakers and foreign exchange traders believe that the intervention operations that have taken place since the plaza agreement of september 1985 have had an effect especially when operations are coordinated moreover the theoretical case against the effectiveness of intervention is not as clear as a reading of the economics literature might suggest the academic literature is predicated on the distinction between intervention operations that are sterilized and those that are allowed to affect the money supply we study the intervention operations that actually took place between 1982 and 1988 regardless of whether they were sterilized however we do begin in section i with a review of the issues involved 2 there are two possible channels through which intervention whether sterilized or not can influence the foreign exchange rate the portfolio and the expectations channels intervention can even if sterilized influence exchange rates through the portfolio channel provided foreign and domestic bonds are considered imperfect substitutes in investors portfolios intervention operations that for example increase the current relative supply of mark to dollar assets which private investors are obliged to accept into their portfolios will force a decrease in the relative price of mark assets 3 intervention can also influence exchange rates regardless of whether foreign and domestic bonds are imperfect substitutes through the expectations channel the public information that central banks are intervening in support of a currency or are planning to intervene in the future may under certain conditions cause speculators to expect an increase in the price of that currency in the future speculators react to this information by buying the currency today bringing about the change in the exchange rate today in sections ii and iii we describe the econometric problems that arise in the standard portfolio balance estimation equation we derive an alternative portfolio balance dominguez kennedy school of government harvard university 79 j f kennedy street cambridge ma 02138 frankel department of economics university of california 787 evans hall berkeley ca 94720 we thank three anonymous referees for valuable comments and suggestions julia marsh and julia lowell for research assistance and franz scholl at the bundesbank jean pierre roth at the swiss national bank and officials at the u s treasury and the board of governors of the federal reserve system for making the daily intervention data available 1many of the econometric results finding little or no effect were reported in kenneth s rogoff 1984 and dale w henderson and stephanie sampson 1983 2for authoritative statements see henderson 1984 or maurice obstfeld 1990 3the exchange rate reaction to an increase in the relative supply of outside foreign assets may be reduced if there is an increase in their expected rate of return that induces a corresponding increase in demand

shocking language understanding the macroeconomic effects of central bank communication we explore how the multi dimensional aspects of information released by the fomc has effects on both market and real economic variables using tools from computational linguistics we measure the information released by the fomc on the state of economic conditions as well as the guidance the fomc provides about future monetary policy decisions employing these measures within a favar framework we find that shocks to forward guidance are more important than the fomc communication of current economic conditions in terms of their effects on market and real variables nonetheless neither communication has particularly strong effects on real economic variables

monetary policy predictability in the euro area an international comparison we evaluate the ability of market participants to anticipate monetary policy decisions in 14 countries first by looking at both the magnitude and volatility of changes in the money market rates we show that the days of policy meetings are special days for financial markets second we find that the predictability of federal reserve fed bank of england and european central bank ecb is fully comparable finally an econometric analysis of the ability of market participants to incorporate in the current short term interest rates the expected policy changes shows that in the euro area and in other countries policy decisions are anticipated well in advance

federal reserve communications and newswire coverage in this article we explore the determinants of newswire coverage of federal reserve fed communications our sample covers all 344 forward looking communications made in the period may 1999 to may 2004 we find first that there is a higher likelihood of newswire coverage for monetary policy reports and speeches by chairman greenspan than for testimony and speeches by other fed members furthermore communications with an explicit monetary policy inclination or tone different from the current interest rate path are particularly likely to be covered however the release of important macroeconomic news reduces the likelihood of newswire coverage second speeches by regional fed presidents are relatively less likely to be reported than speeches by board members nevertheless newswire coverage of fed president speeches is more likely if central bank communication is stale finally our results indicate that ben bernanke played a distinguished role even before his chairmanship

voting transparency in a monetary union we examine whether the monetary policy committee of a monetary union should publish its voting records when members are appointed by national politicians we show that the publication of voting records lowers overall welfare this finding also holds for arbitrary levels of private benefits from holding office and if governments incur costs when replacing committee members high private benefits of committee members always lower overall welfare as they induce nonpartisan members to care more about being reappointed than about beneficial policy outcomes nonrenewable but long terms for national committee members and delegating the appointment of all committee members to a union wide authority would be desirable

credibility and flexibility with independent monetary policy committees independent monetary policy committees are a simple way of attaining relatively low inflation without completely sacrificing an activist role for monetary policy if central bankers types are unknown then for a wide range of parameters an independent committee achieves higher social welfare than either a zero inflation rule or discretionary policy conducted by an opportunistic central banker a key reason for the committee s superior performance is that committee members are relatively likely to opt for low inflation and building a reputation when shocks are small when large shocks hit the economy the incentive to react outweighs the reputationbuilding benefit

does a bias in fomc policy directives help predict intermeeting policy changes since 1984 the fomc has issued directives indicating a bias toward easing or tightening this paper investigates the information content of these asymmetric directives for the likelihood of inter meeting changes in policy during the greenspan chairmanship if policy is measured by the change in the average daily federal funds rate after a directive is issued the results indicate that a bias predicts a significant change in the average funds rate if policy is measured qualitatively by whether the target for the federal funds rate changed a bias significantly affects the probability that the target will be changed

monetary policy in the media just like private companies depend crucially on their ability to reach customers policymakers must communicate with private agents to be successful and much of this communication is channeled through the media this is especially true for central banks which need to build credibility among the general public this paper analyses how favorably the print media report about the european central bank s ecb monetary policy decisions favorableness is inter alia influenced by the amount of information communicated by the ecb there are however also indications of a critical monitoring role of the media which reports more negatively when inflation exceeds the inflation target

from turmoil to crisis dislocations in the fx swap market before and after the failure of lehman brothers abstract this paper investigates dislocations in the foreign exchange fx swap market between the us dollar and three major european currencies after the failure of lehman brothers in september 2008 deviations from covered interest parity cip were negatively associated with the creditworthiness of us financial institutions as well as that of european institutions consistent with the deepening of a dollar liquidity problem into a global phenomenon us dollar term funding auctions by the ecb snb and boe as well as the us federal reserve commitment to provide unlimited dollar swap lines are found to have ameliorated the fx swap market dislocations

spread the word international spillovers from central bank communication abstract we construct a novel text dataset to measure the sentiment component of communications for 23 central banks over the 2002 2017 period our analysis yields three results first comovement in sentiment across central banks is not reducible to trade or financial flow exposures second sentiment shocks generate cross country spillovers in sentiment policy rates and macroeconomic variables and the fed appears to be a uniquely influential generator of such spillovers even among prominent central banks and third geographic distance is a robust and economically significant determinant of comovement in central bank sentiment while shared language and colonial ties have weaker predictive power

purdah on the rationale for central bank silence around policy meetings many central banks share the practice of purdah a guideline of abstaining from communication around policy meetings although seemingly contradicting the virtue of transparency by withholding information precisely when it is sought after intensely it has been justified on grounds that such communication may create excessive market volatility this paper assesses the purdah for the federal reserve and confirms that financial markets are substantially more sensitive to central bank communication around policy meetings short term interest rates react three to four times more strongly in the purdah before federal open market committee meetings than otherwise and volatility increases compared to a reduction otherwise

open mouth operations abstract this paper explains how central bank statements rather than open market operations can be used to implement monetary policy in the extreme policy instruments can be held constant and yet interest rates will evolve along the path desired by the central bank we show how the recent implementation of monetary policy in new zealand works in this way using announcement data from new zealand we find that open mouth operations lead to large changes in interest rates across all maturities and these changes cannot be explained by open market operations implications are drawn for monetary policy in other jurisdictions

young workers and quit behaviour a model is set up to explain the quit behaviour of new entrants to the labour market it uses an incentive opportunity approach to integrate existing relevant arguments from search and information theory and human capital analysis it also provides for impetuous quits the model is tested by an examination of a disaggregated data set concerning a single cohort of 16 year old school leavers in the first year after gaining full time work the theory received strong support for example in the main model seven out of the ten coefficients were highly significant interestingly even in a time of deepening recession the existence of the job shopper seemed to be apparent

domestic or u s news what drives canadian financial markets i introduction canada as a small open economy depends to a large extent on global economic developments trade and capital flow linkages to its major trading partners as well as the foreign interest rate level are important for the canadian economy in our sample period about two thirds of total portfolio investments in canada are made by u s investors the trade share with the united states is also quite large 77 in 1998 68 in 2006 in 95 of all currency transactions involving canadian dollars these are converted into u s dollars and vice versa 1 these figures indicate that economic developments in the united states and its monetary policy mp should play an important role particularly in the development of the canadian economy and its financial markets there has even been discussion of creating a monetary union between canada and the united states or unilaterally adopting a u s dollar peg for instance buiter 1999 concludes that economic arguments favor a full formally symmetric monetary union therefore when studying canadian financial markets one needs to consider economic events occurring in the united states gravelle and moessner 2001 state that throughout the 1990s canadian market participants tended to put greater emphasis on u s macroeconomic data releases than on canadian ones thus one should expect u s macroeconomic news and mp to have a significant impact on canadian financial markets in addition it is important to study mp communication in a broad sense and not only target rate changes as market participants but also adjust to news conveyed in speeches and testimony by federal open market committee fomc members as u s financial markets react to informal channels of mp we expect canadian markets will too 2 our sample period 1998 2006 includes several formal and informal changes in canadian mp ever since september 1998 the bank of canada boc has intervened in the foreign exchange market only under exceptional circumstances in september 2000 it introduced fixed announcement dates fads previously target rate changes could effectively occur on any business day 3 with the introduction of fads the boc became more independent from the federal reserve bank fed the boc does not explicitly refer to any prior decisions by the fed in its post meeting statements after may 2000 for instance between april 2002 and september 2004 the boc target rate deviates substantially from the federal funds target rate see figure a1 in the appendix this is the first paper to study the effects of formal and informal communication by the boc as well as by the fed on canadian financial markets using a novel set of data in this paper we address four research questions 1 do u s and canadian central bank communication including target rate changes and macroeconomic news have an impact on canadian financial market returns 2 which type of news u s or canadian is more relevant 3 does the introduction of the fad system change agents sensitivity to canadian news in particular is there a stronger reaction to canadian news in the april 2002 to september 2004 subsample a period during which the course of boc mp was different from that of the fed compared to reactions in other periods this is of particular interest as the boc followed the u s interest rate path closely even after introduction of the fad system 4 does u s and canadian news exert an influence on financial market volatility the remainder of this paper is organized as follows in the next section we summarize previous work in this area and outline the contributions of this paper section iii describes the construction of the news dummies and explains our data set section iv introduces the econometric methodology section v reports our empirical results for bond market returns section vi focuses on stock and foreign exchange market returns

social value of public information comment morris and shin 2002 is actually pro transparency not con the main result of morris and shin 2002 restated in papers by amato morris and shin 2002 and amato and shin 2003 and commented upon by the economist 2004 has been presented and interpreted as an anti transparency result more public information can be bad however some scrutiny of the result shows that it is actually pro transparency except in very special circumstances more public information is good furthermore for a conservative benchmark of equal precision in public and privateinformation social welfare is higher than in as ituation without public information

central bank swap line effectiveness during the euro area sovereign debt crisis abstract the federal reserve re established a swap line with the european central bank in response to the international liquidity stresses created by the euro area sovereign debt crisis we examine the swap line s effectiveness in addressing these stresses in 2010 11 we find that announcements about the swap line had a significant effect in reducing euro dollar fx swap spreads during the 2010 11 crisis but that the swap line only had limited effectiveness in alleviating the stresses probably owing to some stigma being attached to its use

remittances household expenditure and investment in guatemala the author uses a large household data set from guatemala to analyze how the receipt of internal remittances from guatemala and international remittances from the united states affects the marginal spending behavior of households on various consumption and investment goods contrary to other studies the author finds that households receiving remittances actually spend less at the margin on consumption food and consumer goods and durables than do households receiving no remittances instead of spending on consumption households receiving remittances tend to spend more on investment goods like education health and housing the analysis shows that a large amount of remittance money goes into education at the margin households receiving internal and international remittances spend 45 and 58 percent more respectively on education than do households with no remittances these increased expenditures on education represent investment in human capital like other studies the author finds that remittance receiving households spend more at the margin on housing these increased expenditures on housing represent a type of investment for the migrant as well as a means for boosting local economic development by creating new income and employment opportunities for skilled and unskilled workers

what matters when the impact of ecb communication on financial market expectations this article analyses financial markets reaction to european central bank s ecb communication we apply a novel indicator that quantifies the contents of the ecb s introductory statements and allows disentangling ecb statements on prices the real and the monetary sector we provide evidence that it matters what issue the ecb is speaking about especially the ecb s statements on price developments represent important news to financial markets it also matters when the ecb affects markets communication drives maturities above 4 months