Blog post by Stefan Gebauer, Thomas McGregor and Julian Schumacher | Central banks choose their words very carefully. And rightly so – policy makers’ wording can move markets and, eventually, the economy. This ECB Blog post shows how unexpected changes in communication influence growth and inflation. Central banks need to communicate clearly. This helps the public understand the rationale behind monetary policy decisions and shape market expectations. Their statements sometimes provide explicit forward guidance on the future direction of monetary...

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Abstract Rising trade tensions, a spate of trade-inhibiting policy measures and a weakening of multilateral institutions have sparked a growing concern about the potential implications of global trade fragmentation. Yet, empirical evidence that geopolitical considerations are already materially affecting trade flows is scant. In this study, we quantify the impact of geopolitical tensions on trade of manufacturing goods over the period 2012-2022 in a structural gravity framework. To capture the influence of geopolitical tensions, we use a measure of...

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