ECB monetary policies: The increasing importance of communication

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Abstract

Over the recent two decades, monetary policy has increasingly become the art of managing expectations. As a consequence, central bank communication has become an important instrument in central banks’ toolkits. Central bank communication was initially primarily focused on financial markets. Recently, however, central banks started paying increasing attention to communication with the general public. The European Central Bank (ECB) is no exception. Although communicating with the general public is important, it is not clear whether non-experts are within reach of the ECB. Even if they receive the communications, it cannot be taken for granted that they process them, and do so appropriately, as non-experts might lack the relevant background or because the communication by the central banks is too complex. However, even if central bank communication with the general public may have limited impact on inflation expectations, central bank accountability simply requires that central banks talk (and listen) to the general public. Clear and easy to understand communication to the general public is essential for the ECB’s legitimacy. The ECB should therefore primarily focus on explaining its price stability mandate in communicating to the general public, and do so in a relatable manner.
Original languageEnglish
Title of host publicationThe Cambridge Handbook on European Monetary, Economic and Financial Market Integration
EditorsDariusz Adamski, Fabian Amtenbrink, Jakob de Haan
Place of PublicationCambridge
PublisherCambridge University Press
Chapter11
Pages197-214
Number of pages18
ISBN (Electronic)9781009364706
DOIs
Publication statusPublished - 2023

Publication series

NameCambridge Law Handbooks
PublisherCambridge University Press

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