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Finance and Economics Discussion Series
Finance and Economics Discussion Series logo links to FEDS home page Central Bank Talk: Does It Matter and Why?
Donald L. Kohn and Brian P. Sack

Abstract: Statements released by the Federal Open Market Committee (FOMC) and congressional testimony by Chairman Greenspan are found to significantly affect market interest rates, indicating that central bank "talk" conveys important information to market participants. These effects arise not only because the statements provide information about the near-term policy inclinations of the FOMC but also because the statements convey information about the outlook for the economy. By contrast, statements raising questions about asset valuations typically have not generated a significant response of those asset prices.

Keywords: Monetary policy, statements, speeches, transparency

Full paper (276 KB PDF)

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Last update: November 17, 2003