Measuring the ECB's Monetary Policy Stance: A 'Media-Based' Automated Approach

Abstract

I present a new measure of the European Central Bank (ECB)'s monetary policy stance based on the content of articles published by major English-speaking written media in the days around meetings of the ECB Governing Council (GC). I study the relationship between the media perception of the ECB's stance and futures monetary policy decisions of the GC and I find it to be statistically significant. Moreover I present evidence that changes in the perception of the ECB's stance around GC meeting days are due to new information conveyed by the press conference of the ECB President rather than by the policy rate decision taken by the GC. Finally, I find that changes in the perception of the ECB's stance affect market expectations of future policy rates.