Working Paper: CEPR ID: DP15735
Authors: Kilian Rieder; Phillipp Gnan
Abstract: We use confidential data to provide an empirical primer on the European Central Bank's (ECB) monetary policy quiet period between 2008 and 2021. Breaches of blackout rules happen regularly and their frequency is heterogeneous across ECB Governing Council members. We document that quiet period breaches trigger high-frequency market reactions that are up to twice as large as the median market reaction to speeches in inter-meeting periods. Controlling for member and time fixed effects, we find that breaches respond to absolute inflation deviations of policy-makers’ constituencies from the ECB's target and to interest rate spreads inside the euro area. We also exploit plausibly exogenous variation in the ECB's rotational voting schedule to show that non-voting members do not engage in strategic communication during the quiet period to lock in their voting peers.
Keywords: Monetary Policy; Quiet Period; Rotational Voting; Decision-Making; Central Bank Communication; European Central Bank; Home Bias
JEL Codes: D82; D83; E52; E58; E61; G12
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| breaches of quiet period rules (G24) | significant high-frequency market reactions (G14) |
| breaches of quiet period rules (G24) | market expectations regarding monetary policy timing (E60) |
| breaches of quiet period rules (G24) | absolute inflation deviations of policymakers' constituencies from the ECB's target (E31) |
| breaches of quiet period rules (G24) | interest rate spreads within the euro area (E43) |
| non-voting members do not engage in strategic communication during quiet periods (G34) | lack of increased breaches of quiet period rules (G14) |