ONGOING PROJECTS
ONGOING PROJECTS
[2023] Central bank communication by ??? The economics of public policy leaks [with Michael Ehrmann, Kilian Rieder]
The ECB Blog, CEPR Discussion Paper 18152, SSRN 4453039.
Leaks of confidential information emanating from public institutions have been the focus of a long-standing line of research. Yet, their determinants as well as their potential impact on public views and on policy effectiveness remain elusive. We construct a database of anonymous monetary policy leaks in the euro area as reported by newswires. We provide evidence that many of these leaks are likely placed by individual insiders with minority opinions. Central banks offer a unique setting to study the effects of leaks because associated changes in public views are instantaneously reflected in financial markets. While we find that leaks have large effects on markets and weaken official policy announcements, the evidence also suggests that leaks do not lock in decision-makers, and that attributed communication can mitigate some of their effects.
[2022] Deciphering Monetary Policy Shocks [with Maximilian Schleritzko, Maik Schmeling, Christian Wagner]
VOXEU column, CEPR Discussion Paper 17295, SSRN 4074113.
We decipher monetary policy shocks by directly connecting them to the stance a central bank expresses in its communication about different topics. To measure topic-specific central bank stances, we apply textual analysis techniques to press conference statements of the European Central Bank (ECB). Using three sets of shocks established in the literature, based on either high-frequency market reactions in interest rates, the entire term structure, or the joint response in interest rates and stock prices, we find that markets distinctively react to news on the topics rate guidance, economic activity, and financial and monetary conditions. Likewise, responses in sovereign yield spreads and exchange rates can be directly linked to specific topics. Our findings provide validation for price-based monetary policy shocks used in numerous studies in monetary economics and asset pricing. They should also prove useful for the optimal design of policy communication.
[2022] Revisiting Discount Rates: New Evidence from Surveys [with Maximilian Schleritzko]
This paper sheds new light on retail investors' risk-return trade-off. Existing evidence from surveys suggests that households expect lower returns, i.e., lower risk compensation, in bad times. Using a direct measure of retail investors' subjective discount rates, we nevertheless find that required compensation for risk rises with perceptions of stock market risk. Our finding thus resonates well with standard asset pricing theory. We also show that the positive risk-return trade-off is stronger for i) financially literate retail investors and ii) during times of financial and economic distress. Our results have important implications for modelling households' risk-return trade-off and the design of future surveys eliciting return expectations.
[2019] The Privilege of Eligibility: Announcement Effects and Spillovers of the ECB's Corporate Sector Purchase Program
This paper examines the immediate impact that the unexpected announcement of the ECB's Corporate Sector Purchase Program on March 10, 2016 had on corporate bond prices. Employing a differences-in-differences specification augmented to a spatial autoregressive model, the impact of the CSPP announcement is disentangled from three other ECB measures introduced on the same day, while accounting for spillovers to the control group of non-eligible bonds. The introduction of the CSPP is estimated to have decreased the yield spread of eligible corporate bonds by 12bp (10% relative change) within two trading days after the announcement. While the results are in line with the notion of a strong portfolio rebalancing channel, as intended by the ECB, the analysis at the same time also documents persistently heterogeneous effects between eligible and non-eligible bonds, hinting at the formation of a more permanent price premium following the announcement.
[2023] The (Not So) Quiet Period: Communication by ECB Decision-makers during Monetary Policy Blackout Days [with Kilian Rieder]
Journal of International Money and Finance, CEPR Discussion Paper 15735, SSRN 4138865.
We use confidential data to provide an empirical primer on the European Central Bank's (ECB) monetary policy quiet period between 2008 and 2021. Breaches of blackout rules happen regularly and their frequency is heterogeneous across ECB Governing Council members. We document that quiet period breaches trigger high-frequency market reactions that are up to twice as large as the median market reaction to speeches in inter-meeting periods. Controlling for member and time fixed effects, we find that breaches respond to absolute inflation deviations of policy-makers’ constituencies from the ECB's target and to interest rate spreads inside the euro area. We also exploit plausibly exogenous variation in the ECB's rotational voting schedule to show that non-voting members do not engage in strategic communication during the quiet period to lock in their voting peers.
[2018] Wage differences between immigrants and natives: The role of literacy skills [with Michael Christl and Monika Köppl-Turyna]
Journal of Ethnic and Migration Studies.
This paper analyses the impact of literacy skills on wage differences between natives and immigrants, using Austria as a case study. We show that, for both groups, literacy skills are an important determinant of the hourly wage. In the second step, we show that differences in proficiency with respect to literacy can explain more than 30% of the total wage gap of 11 log points between natives and immigrants. When adding literacy skills to the wage decomposition, the unexplained part vanishes almost completely, suggesting that the wage difference between immigrants and natives can, to a large extent, be explained. The importance of literacy skills in explaining wage differences between natives and immigrants is robust across several sensitivity tests.