Central Bank Communication and Financial and Macro Variables: The Case of European Inflation Targeters

This paper investigates the effect of central bank communication on financial (interest and exchange rates) and macro (inflation and production) variables in twelve European inflation targeters in 2012-2018. After deriving the tone and topics of communications from policy releases, a heterogeneous panel SVAR is estimated. The results show that the communication effect exists mostly for financial variables; a more pronounced response was found for domestic shocks. The study contributes to the literature by covering economies not at the center of the economic discussion, as well as utilzing a model which can address different types of shocks.