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11 - ECB Monetary Policies

The Increasing Importance of Communication

from Part II - The Monetary Dimension

Published online by Cambridge University Press:  28 September 2023

By
Jakob de Haan
Edited by
Dariusz Adamski ,
Fabian Amtenbrink  and
Jakob de Haan
Dariusz Adamski
Affiliation:
University of Wroclaw
Fabian Amtenbrink
Affiliation:
Erasmus Universiteit Rotterdam
Jakob de Haan
Affiliation:
University of Groningen
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Summary

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.

Type
Chapter
Information
The Cambridge Handbook of European Monetary, Economic and Financial Integration , pp. 197 - 214
Publisher: Cambridge University Press
Print publication year: 2023

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