Same actions, different effects: The conditionality of monetary policy instruments

This paper explores the signaling effect of central bank announcements clarifying the reaction function of policy interventions. We exploit the unique setting provided by ECB asset purchase programs. We find that the same action - purchases of identical assets - undertaken under different titles generates different responses. PSPP affects inflation swaps whereas PEPP impacts sovereign spreads, so that only the variables associated with the communicated rationale of each program react. We highlight the importance of clarifying the conditional path of policy instruments for the transmission of monetary policy. We also provide evidence of this signaling channel from other ECB and BoE announcements.