Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/279162 
Year of Publication: 
2023
Series/Report no.: 
CESifo Working Paper No. 10413
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
Do firms' and consumers' expectations react to central bank announcements? Past literature has come to divergent conclusions, but it has systematically ignored how media treat the announcements. This paper investigates the link between monetary policy announcements and expectations by taking into account their media treatment. We initially rely on the standard monetary policy surprise measures in the euro area to identify exogenous changes in monetary policy stances. We then analyze how the main general newspapers in France report on announcements. 85 % of the monetary policy surprises are either not associated with the newspapers reporting a change in the monetary policy stance or have a sign that is inconsistent with the media report. Only when we consider media-consistent monetary policy surprises do we find that consumers and firms respond to monetary policy announcements. We then build our own measure of media monetary policy surprises and confirm that these matter. Further analysis reveals that the tonality of the media reports on the economy drives the sign of consumers' response.
Subjects: 
firm expectations
consumer expectations
monetary policy surprises
European Central Bank
information effect
JEL: 
D84
E02
E52
E31
Document Type: 
Working Paper
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