We thank for comments Refet Gürkaynak, our discussant Anja Baum, as well as participants at seminars at Bonn University, HEI Geneva, the BIS, FU Berlin, University of St Gallen, the ECB, University of Navarra, the Bank of England, the 2010 Konstanz Seminar on Monetary Theory and Policy, the 2010 Finlawmetrics conference, the University of Münster/Viessmann European Research Centre/NBP conference ‘Heterogeneous Nations and Globalized Financial Markets: New Challenges for Central Banks’, the CEPR/ESI 14th Annual Conference and the BoK-BIS Conference on Macroprudential Regulation and Policy. We are also grateful to a large number of colleagues in various central banks for their help in identifying the release dates of Financial Stability Reports. Earlier versions of this article have been circulated under the title ‘Macroprudential policy and central bank communication’. This article presents the authors' personal opinions and does not necessarily reflect the views of the European Central Bank.
Central Bank Communication on Financial Stability
Article first published online: 1 JUL 2013
© 2013 The Author(s). The Economic Journal © 2013 Royal Economic Society
The Economic Journal
Volume 124, Issue 577, pages 701–734, June 2014
How to Cite
Born, B., Ehrmann, M. and Fratzscher, M. (2014), Central Bank Communication on Financial Stability. The Economic Journal, 124: 701–734. doi: 10.1111/ecoj.12039
- Issue published online: 16 JUN 2014
- Article first published online: 1 JUL 2013
- Accepted manuscript online: 19 MAR 2013 09:31AM EST
- Manuscript Accepted: 7 NOV 2012
- Manuscript Received: 30 AUG 2011
Central banks regularly communicate about financial stability issues. This article asks how such communications affect financial markets, based on a unique dataset covering more than 1,000 releases of Financial Stability Reports (FSRs) and speeches by 37 central banks over the past 14 years. The findings suggest that optimistic FSRs lead to significant and potentially long-lasting positive abnormal stock market returns, whereas no such effect is found for pessimistic FSRs. Speeches and interviews, in contrast, have smaller effects on market returns during tranquil times but have been influential during the 2007–10 global financial crisis.