Central Bank Communication: The Economics of Monetary Policy Leaks

with Phillipp Gnan and Kilian Rieder

We exploit high frequency financial market reactions to conduct the first systematic empirical study on leaks of confidential information emanating from central banks. Based on a novel database of anonymous monetary policy leaks reported by the media, we provide evidence that many of these leaks are likely not accidents, but placed strategically by insiders. We find that leaks have large effects on markets relative to standard monetary surprises, often exceeding the impact of attributed statements by policy-makers. Mainly reflecting minority opinions, leaks do not usually lock-in decision-making, but they weaken the transmission of official policy announcements.