DP15735 Who Talks During Monetary Policy Quiet Periods, and Why? Evidence from the European Central Bank's Governing Council

Author(s): Phillipp Gnan, Kilian Rieder
Publication Date: January 2021
Keyword(s): career concerns, central bank communication, Central bank transparency, decision-making, European Central Bank, Home Bias, leaks, monetary policy, quiet period, rotational voting
JEL(s): D82, D83, E52, E58, E61, G12
Programme Areas: Monetary Economics and Fluctuations
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=15735

This paper provides the first systematic analysis of individual monetary policy-makers' incentives to communicate during so called "quiet periods" in the run-up to policy meetings. We ask why and when monetary policy-makers breach quiet period rules. Based on proprietary compilations by the European Central Bank's (ECB) Directorate General Communications, we construct a novel statement-level data set documenting all public statements by ECB Governing Council members during the 116 quiet periods between October 2008 and January 2020. We describe the broad trends in quiet period communication since 2008. While career concerns and home bias do not explain breaching behavior, we find that members' policy-making experience and expertise are associated with explicit breaches of the quiet period. Following a statement-by-statement review of the ECB's classification of statements, we also provide an alternative series of quiet period breaches. We show that the difference between the original ECB series and our alternative series is driven by diverging records of explicit breaches by ECB Executive Board members before 2014. Finally, we exploit plausibly exogenous variation in the ECB rotational voting schedule to show that Governing Council members' communication behavior during the quiet period is consistent with the narrative of the ECB Governing Council as a collegial, consensus-seeking decision-making body. Our findings directly contribute to the growing literature on free-riding, career concerns and transparency in monetary policy-making. We also discuss several empirically founded policy implications of our paper relevant to the design of the quiet period in the euro area and monetary policy communication more generally.