https://fraser.stlouisfed.org/files/docs/historical/federal reserve history/bog_members_statements/gramlich_19990325.pdf

Testimony before the Committee on Banking, Housing and Urban Affairs, U.S. Senate : On H.R. 3150, the Bankruptcy Reform Act of 1998

In response to the financial crisis of 2007–10, many central banks have been given responsibility for macroprudential supervision. This paper argues that central bank communication will play a central role for that purpose, and makes the point that it should be generally geared towards clarity, transparency and predictability, in order to enhance the effectiveness of macroprudential policies and ensure central bank accountability. Moreover, central banks must manage expectations by clearly communicating what macroprudential policy can achieve, and what its limitations are, to counteract reputational risks. This paper also provides empirical evidence showing that financial markets react significantly and systematically to central bank communication about financial stability issues. However, some forms of communication – such as through speeches – may at times raise volatility and uncertainty, in particular during crises, thus underlining the importance of choosing carefully a communication strategy on macroprudential policy which is suited for a given market environment.

Communicating About Macro-prudential Supervision – A New Challenge for Central Banks

Effects of explicit FOMC policy rate guidance on interest rate expectations

Using the high-quality intraday transaction data from 2001–2012, we investigate changes in stock market liquidity in response to the monetary policy announcements of the Bank of Korea (BOK). We find that liquidity impairment associated with informed trading occurs prior to the announcements but it disappears subsequent to the global financial crisis. In addition, liquidity impairment appears to become more severe with insufficient experts' predictability and accuracy rather than with policy rate change itself and unscheduled announcements. Finally, the Federal Open Market Committee (FOMC) announcements, changes in the Volatility Index (VIX), and trading by foreign investors play a limited role in explaining stock market liquidity changes. Overall, results indicate that central bank communication plays a significant role in reducing liquidity impairment by enhancing the predictability of policy actions, and therefore, mitigating information asymmetry.

https://papers.ssrn.com/sol3/Delivery.cfm/AEPA_AEPA12069.pdf?abstractid=2836736&mirid=1

Monetary Policy Announcements, Communication, and Stock Market Liquidity

Central Banks’ Communication Strategy and Content Analysis of Monetary Policy Statements: The Case of Fed, ECB and CBRT

The recognition of information asymmetries and uncertainties has led central banks to
attach great importance to communication policy as a monetary policy instrument. In
this paper, we argue that there is a role for central bank communication in maintaining
and improving the resilience of the financial system. We conducted a systematic review
of the empirical evidence on the financial stability effects of a range of different
communication channels. The analysis identifies a pronounced effect of central bank
communication on financial market variables, with statements and press conferences
being seemingly the most effective channel of central bank communication. While less
attention has been paid to written reports as a communication tool, our results also seem
to support the view that written reports move asset prices

/pdf/the-effects-of-central-bank-communication-on-financial-l02obgx4i3.pdf

The Effects of Central Bank Communication on Financial Stability: a systematization of the empirical evidence

/pdf/globalization-and-asset-prices-which-trade-offs-do-central-3v7h70cs4m.pdf

Globalization and Asset Prices: Which Trade-Offs. Do Central Banks Face in Small Open Economies?

During boom-bust cycles in asset prices, monetary policy has the choice between two strategies: the proactive strategy of curbing asset price inflation and preventing a bust-induced credit crunch and the reactive strategy of loosening monetary policy conditions during the boom phase. We show that globalization makes the reactive strategy the favorable option in all situations, relatively to the proactive strategy. However, when employing an absolute comparison of calculating both strategies’ losses, the proactive strategy is the optimal choice in exceptional circumstances.

https://www.ccsenet.org/journal/index.php/ijef/article/download/6754/7319

Optimal Monetary Policy during Boom-Bust Cycles: The Impact of Globalization

Die Studie geht der Frage nach, welche Auswirkungen Zentralbank- Kommunikation auf Finanzstabilitat haben kann. Wir legen die grundlegenden Konzepte der Finanzstabilitat sowie der Zentralbank-Kommunikation dar, indem wir einen Uberblick uber die einschlagige Literatur der jeweiligen Themenkomplexe geben. Ziel dieses Surveys ist, die relevante Literatur zu diskutieren und Schlussfolgerungen im Hinblick auf die Fragestellung zu ziehen, ob Zentralbank-Kommunikation die Finanzmarkte bewegen kann. Dabei systematisieren wir die Kommunikationskanale in Instrumente bezuglich des geldpolitischen Entscheidungsverhaltens und Instrumente des Zentralbank-Berichtswesens. Die von uns betrachten Studien deuten darauf hin, dass Zentralbanken die Finanzmarkte mittels der ihnen zur Verfugung stehenden Kommunikationskanale bewegen konnen. Obwohl unsere Schlussfolgerungen nahe legen, dass Zentralbanken auf lange Sicht sogar in stabilisierender Art und Weise auf diese Einfluss nehmen konnen, besteht diesbezuglich noch grundlegender Forschungsbedarf. Schlieslich betrachtet diese Studie Zentralbank-Kommunikation im Lichte der Subprimekrise.

/pdf/zentralbank-kommunikation-und-finanzstabilitat-eine-46g4sp1jqw.pdf

Zentralbank-Kommunikation und Finanzstabilität: eine Bestandsaufnahme

Can central bank communication act as a complementary instrument when policymakers are facing boom-bust cycles? Against the background of the current discussion about introducing an additional instrument when dealing with asset price misalignments, we argue that one of the core instruments of monetary policy should be considered: central bank communication. In a stylised model, communicating the future path of policy can change the trade-off between the proactive policy of curbing asset price inflation and the reactive policy of loosening monetary policy conditions during the boom phase. We show that the additional use of communication supports the proactive strategy.

Monetary Policy and Boom-Bust Cycles: The Role of Central Bank Communication

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