Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/237721 
Year of Publication: 
2021
Series/Report no.: 
ECB Working Paper No. 2582
Publisher: 
European Central Bank (ECB), Frankfurt a. M.
Abstract: 
This paper investigates the impact of ECB communication of its assessment of the economic outlook on ex-ante inflation uncertainty and sheds light on how central bank information shocks operate. The paper finds that ECB communication of new outlook information not only reduces professional forecasters' disagreement (i.e., the cross-sectional dispersion of their average point forecasts of inflation) but also makes forecasters less uncertain about their own beliefs, thus reducing ex-ante average individual uncertainty. By combining and exploiting these types of ex-ante inflation uncertainty, results suggest that central bank information acts as a "coordination device" able to influence opinions and actions. Most importantly, it generates a "stabilizer effect" by substantially decreasing the dispersion among the inflation point forecasts, which converge towards their unconditional aggregate mean. The results of this paper not only help to explain the impact of new central bank information, but they are also useful for policymakers to define a communication strategy that attenuates ex-ante inflation uncertainty in the most effective way.
Subjects: 
central bank communication
ex-ante inflation uncertainty
inflation expectations
euro area
JEL: 
D83
E52
E58
E65
G14
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-4805-0
Document Type: 
Working Paper

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