Bank of Lithuania
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2021-05-11

ECB Communication: What Is It Telling Us?

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This paper examines changing ECB communication and how it has impacted euro area financial markets over the past two decades. We applied a combination of topic modelling and sentiment analysis for over 2000 public ECB Executive Board member speeches, as well as over 200 ECB press conferences. Topic analysis revealed that the ECB’s main focus has shifted from strategy and objectives, at the inception of the euro area, to various policy actions during the global financial crisis and, more recently, to instruments and economic developments. Sentiment analysis showed an expected trend of a more negative communication tone during periods of turmoil and a gradual shift to a more dovish monetary policy tone over time. Regression analysis revealed that sentiment indices had the expected impact on financial market indicators, while press conferences showed substantially stronger effects than speeches.

JEL Codes: C80, E43, E44, E58, G12.

The views expressed are those of the author(s) and do not necessarily represent those of the Bank of Lithuania.

Financial Markets, ECB, speeches, press conferences, text analysis, sentiments