Abstract
We examine whether unscheduled communication of members of the European Central Bank's (ECB) Governing Council affects financial market comovements. To assess comovements, we employ well-defined measures of stock market and government bond yield coexceedances, i.e., the measures of whether markets jointly decrease or increase and by how much.
We use the daily data from 2008 to 2014 for the four largest euro area countries, Germany, France, Italy and Spain, in a quantile regression framework and control for persistence in coexceedances and a comprehensive set of relevant factors capturing returns and volatility in various segments of financial markets. We find that central bank communication often contributes to greater coexceedances but only when there are extreme events in the financial markets.
The results also suggest that markets perceive the ECB's communication as a euro area-wide shock, but propagation of this shock depends on the financial (in)stability of individual euro area countries.