Central Bank Communication and Monetary Policy: A Survey of Theory and Evidence

Ehrmann, Michael; Fratzscher, Marcel; Haan, Jakob de; Jansen, David‐Jan

doi:10.2139/ssrn.1120764

Cited by 106 publications

(80 citation statements)

References 83 publications

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“…However, as stated by Blinder et al (2008), endogeneity is less of a problem when the release dates of the major communication are known in advance. This is the case for the FOMC policy statements as the dates and times are posted online months in advance.…”

Section: Central Bank Communication and Financial Marketsmentioning

confidence: 99%

“…However, all of these methods have fallen subject to the author's interpretation of the statement. As mentioned in Blinder et al (2008), classifying these documents is a subjective task and also faces the possibility of misclassifications. This risk can be remedied but not eliminated by using methods of content analysis combined with an approach such as having independent classifications by multiple researchers (Berger et al, 2006).…”

Section: Central Bank Communication and Financial Marketsmentioning

confidence: 99%

See 1 more Smart Citation

Central Bank Communication and the Yield Curve: A Semi-Automatic Approach using Non-Negative Matrix Factorization

Crayton

2018

Preprint

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Communication is now a standard tool in the central bank's monetary policy toolkit. Theoretically, communication provides the central bank an opportunity to guide public expectations, and it has been shown empirically that central bank communication can lead to financial market fluctuations. However, there has been little research into which dimensions or topics of information are most important in causing these fluctuations. We develop a semi-automatic methodology that summarizes the FOMC statements into its main themes, automatically selects the best model based on coherency, and assesses whether there is a significant impact of these themes on the shape of the U.S Treasury yield curve using topic modeling methods from the machine learning literature. Our findings suggest that the FOMC statements can be decomposed into three topics: (i) information related to the economic conditions and the mandates, (ii) information related to monetary policy tools and intermediate targets, and (iii) information related to financial markets and the financial crisis. We find that statements are most influential during the financial crisis and the effects are mostly present in the curvature of the yield curve through information related to the financial theme.

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Section: Central Bank Communication and Financial Marketsmentioning

confidence: 99%

Section: Central Bank Communication and Financial Marketsmentioning

confidence: 99%

Central Bank Communication and the Yield Curve: A Semi-Automatic Approach using Non-Negative Matrix Factorization

Crayton

2018

Preprint

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“…In many economies, legislators have been improving the respective legal architectures and procedures to make central banks less reliant on day-to-day policy making and to free them from undue political pressures and influence. While measuring the precise economic consequences of such changes is difficult, there exists some evidence that related shifts in central bank policies in the United States (US) and the United Kingdom (UK) have led to declining levels of inflation, decreasing inflation volatility and the stabilization of inflation expectations (Cukierman and Meltzer, 1986;Blinder, Ehrmann, Fratzscher, De Haan, and Jansen, 2008).…”

Section: Introductionmentioning

confidence: 99%

Measuring Shocks to Central Bank Independence using Legal Rulings

Griller¹,

Huber²,

Pfarrhofer³

2022

Preprint

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We investigate the consequences of legal rulings on the conduct of monetary policy. Several unconventional monetary policy measures of the European Central Bank have come under scrutiny before national courts and the European Court of Justice. These lawsuits have the potential to severely impact the scope and flexibility of central bank policies, and central bank independence in a wide sense, with important consequences for the real and financial economy. Since the number of relevant legal challenges is small, we develop an econometric approach that searches for minimum variance regimes which we use to isolate and measure the effects of these events. Our results suggest that legal rulings addressing central bank policies have a powerful effect on financial markets. Expansionary shocks ease financial conditions along various dimensions, and inflation swap reactions suggest inflationary pressures with stronger effects in the short term.

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“…The Fed's decisions have a chain effect on a broader range of economic factors like inflation, employment, value of currency, growth and loans [10]. Therefore, it is important to analyse the Fed's communications that anchor and guide market expectations, however, it is generally long-form and complex due to the ambiguous and esoteric nature of content [2,7]. Additionally, the Fed has increased their interest in research exploring the importance of Natural Language Processing (NLP) for macroeconomics [4].…”

Section: Introductionmentioning

confidence: 99%

FedNLP: An Interpretable NLP System to Decode Federal Reserve Communications

Lee

Youn

Stevens³

et al. 2021

Proceedings of the 44th International ACM SIGIR Conference on Research and Development in Information Retrieval

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The Federal Reserve System (the Fed) plays a significant role in affecting monetary policy and financial conditions worldwide. Although it is important to analyse the Fed's communications to extract useful information, it is generally long-form and complex due to the ambiguous and esoteric nature of content. In this paper, we present FedNLP, an interpretable multi-component Natural Language Processing (NLP) system to decode Federal Reserve communications. This system is designed for end-users to explore how NLP techniques can assist their holistic understanding of the Fed's communications with NO coding. Behind the scenes, FedNLP uses multiple NLP models from traditional machine learning algorithms to deep neural network architectures in each downstream task. The demonstration shows multiple results at once including sentiment analysis, summary of the document, prediction of the Federal Funds Rate movement and visualization for interpreting the prediction model's result. Our application system and demonstration are available at https://fednlp.net CCS CONCEPTS• Computing methodologies → Natural language processing; • Social and professional topics → Systems development.

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Central Bank Communication and Monetary Policy: A Survey of Theory and Evidence

Cited by 106 publications

References 83 publications

Central Bank Communication and the Yield Curve: A Semi-Automatic Approach using Non-Negative Matrix Factorization

Central Bank Communication and the Yield Curve: A Semi-Automatic Approach using Non-Negative Matrix Factorization

Measuring Shocks to Central Bank Independence using Legal Rulings

FedNLP: An Interpretable NLP System to Decode Federal Reserve Communications

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