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Central Bank Communication in the Financial Crisis: Evidence from a Survey of Financial Market Participants

In this paper, we investigate the relationship between market participants' perception of central bank communication and their evaluation of central banks' (i) credibility, (ii) unorthodox measures, and (iii) independence. We utilise a survey of more than 550 financial market participants from around the world who answered questions in reference to the Bank of England (BoE), the Bank of Japan (BoJ), the European Central Bank (ECB), and the Federal Reserve (Fed). We find that market participants believe that the Fed communicates best, followed by the BoE, ECB, and BoJ. Similar rankings are found on the issues of credibility, satisfaction with unconventional monetary policy, and level of independence. Using ordered probit models, we show that perception of central bank communication is positively related to (i) evaluation of central bank credibility, (ii) satisfaction with unorthodox measures, and (iii) perceived level of central bank independence.