Central Bank Communication and Systemic Stress

• Název práce v češtině: Komunikace centrální banky a systemový stres
• Název v anglickém jazyce: Central Bank Communication and Systemic Stress
• Klíčová slova: centrální banky, komunikace, ECB, systémový stres
• Klíčová slova anglicky: central banks, communication, ECB, systemic stress
• Akademický rok vypsání: 2016/2017
• Typ práce: diplomová práce
• Jazyk práce: angličtina
• Ústav: Institut ekonomických studií (23-IES)
• Vedoucí / školitel: prof. Roman Horváth, Ph.D.
• Řešitel: skrytý - zadáno vedoucím/školitelem
• Datum přihlášení: 11.06.2017
• Datum zadání: 11.06.2017
• Datum a čas obhajoby: 16.01.2019 08:30
• Místo konání obhajoby: Opletalova - Opletalova 26, O206, Opletalova - místn. č. 206
• Datum odevzdání elektronické podoby: 04.01.2019
• Datum proběhlé obhajoby: 16.01.2019
• Oponenti: doc. PhDr. Ing. et Ing. Petr Jakubík, Ph.D., Ph.D.

Seznam odborné literatury

Born, B., Ehrmann, M., Fratzscher, M., 2015. Central Bank Communication on Financial Stability, Economic Journal, 124, 701-734.
de Haan, J. and D.-J. Jansen, 2009. The Communication Policy of the European Central Bank: An Overview of the First Decade, de Nederlandsche Bank working paper, No. 212.
Ehrmann, M. and M. Fratzscher, 2007b. Communication by Central Bank Committee Members: Different Strategies, Same Effectiveness?, Journal of Money, Credit and Banking, 39(2-3), 509-541.
Gertler, P. and R. Horv\'{a}th, 2017. Central Bank Communication and Financial Markets: New High-Frequency Evidence, Journal of Financial Stability.
Hakkio, S. C. and W. R. Keeton, 2009. Financial Stress: What Is It, How Can It be Measured, and Why Does It Matter?, Federal Reserve Bank of Kansas City, Economic Review, Second Quarter, pp. 5- 50.
Hollo, D., Kremer, M. and M. Lo Duca, 2012. CISS - A Composite Indicator of Systemic Stress in the Financial System, European Central Bank WP, No. 1426.
Knütter, R., Mohr, B. and H. Wagner, 2011. The Effects of Central Bank Communication on Financial Stability: A systematization of the Empirical Evidence, Fernuniversität Hagen Discussion Paper No. 463.

Předběžná náplň práce v anglickém jazyce

The recent financial crisis brought the issue of not only how to stabilize financial markets, but also how to communicate the needed policy measures. Communication of important policy makers is a strong tool, as the sole expression of certain intentions can guide the market agents to alter their behavior and have thus material impact on the real economy. Central banks are certainly among the most important policy makers and in the light of the crisis, there has been a strengthened emphasis on their clear and reliable communication to maintain transparency and credibility. Even though the verbal communication has been a traditional tool of central banks, as Gertler and Horv\'{a}th (2017) aptly remark, the manners and content of the communication have undergone a change. To satisfy the demand for information they communicate more often and ad-hoc beyond the official policy meetings, which also attracts higher attention given the universality of monetary policy in the global economy. The need for non-standard measures has also broadened the mandate.

The existing literature focused on central bank communication and its impact on the financial market is rather abundant covering the links to interest rates, asset prices, exchange rates using various data frequencies. Numerous studies document that central bank communication indeed affects various aspects of the financial markets. However, to the best of my knowledge, there exists no research aimed at the influence of central bank communication on the current level of stress in the financial system. This systemic stress can be defined as a state of the financial system, in which the financial instability became widespread and impairs the functioning of the financial system to the point where economic growth suffers materially (de Bandt and Hartman, 2000). Following similar intuition, as Knütter et al. (2011) I believe that a transparent and consistent communication of central bank can help to adjust the expectations of economic agents and reduce uncertainties in the financial markets. On the other hand, if the statements are erratic or unexpected, it may increase the uncertainties of the agents and increase the systemic stress. I want to test this proposed relationship empirically, conveniently the European Central Bank constructs a composite indicator of the systemic stress, which allows for real-time measuring of the current financial system instability and offers a possibility to react more promptly and accurately.

As mentioned before, central banks are important players in the financial markets and one of their purposes is to maintain systemic stability, therefore I believe that it is useful to study the effectivity of the way they actually do so. I chose to inspect the effect of ad-hoc (non-official) communication of the members of the Governing Council of European Central Bank (ECB), which is arguably the most influential central bank in Europe and one of the most important in the whole world, on the level of systemic stress.

Hypothesis #1: Statements of European Central Bank Governing Council affect the systemic stress.
Hypothesis #2: Statements expressing positive outlook have a weaker impact on the systemic stress than the negative ones.
Hypothesis #3: Statements of GC member from a country under financial stress or from a core member of the euro area have a stronger impact on the systemic stress.