The Information Content of Central Bank Minutes

Apel, Mikael; Grimaldi, Marianna

doi:10.2139/ssrn.2092575

Cited by 63 publications

(58 citation statements)

References 31 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…To measure the tone of the sentences on the economic situation, we use "directional" word lists measuring words associated with expansion and contraction as used in Apel and Blix Grimaldi (2012). For example, in table 1 we list some of the words that we associate with contraction and expansion.…”

Section: Measuring Tone With Dictionary Methodsmentioning

confidence: 99%

Shocking Language: Understanding the Macroeconomic Effects of Central Bank Communication

2015

View full text Add to dashboard Cite

We explore how the multi-dimensional aspects of information released by the FOMC has effects on both market and real economic variables. Using tools from computational linguistics, we measure the information released by the FOMC on the state of economic conditions, as well as the guidance the FOMC provides about future monetary policy decisions. Employing these measures within a FAVAR framework, we find that shocks to forward guidance are more important than the FOMC communication of current economic conditions in terms of their effects on market and real variables. Nonetheless, neither communication has particularly strong effects on real economic variables. JEL Codes: E52, E58 * We have benefited from comments during the ISOM conference in Zurich, and seminars at the National University of Singapore and the IMF. We would like to especially thank Martin Bodenstein, James Cloyne, Carlo Favero, Paul Hubert, Oscar Jorda, Christian Julliard, Dimitris Korobilis, Francesca Monti, Helene Rey and Francisco Ruge-Murcia for insightful comments, suggestions and discussions. Paul Soto and Marcel Schlepper provided excellent research assistance. Part of this work was completed when both authors were Houblon-Norman Fellows at the Bank of England. Michael is currently based at the IMF-STI. The views expressed in this paper are those of the authors and do not necessarily represent those of anyone at the Bank of England, the IMF or IMF policy. We also benefited from a British Academy small grant. Any errors remain ours alone.

show abstract

Section: Measuring Tone With Dictionary Methodsmentioning

confidence: 99%

Shocking Language: Understanding the Macroeconomic Effects of Central Bank Communication

2015

View full text Add to dashboard Cite

show abstract

“…Furthermore, unlike many other central banks, the ECB does not disclose individual voting records, meaning that disagreements, 1 From 2015 onward, the GC will meet every six to seven weeks. 2 Other sources of a disagreement include different information about the state of the economy and the use of different economic models.…”

Section: Find This To Be True For the Federal Open Market Committee (mentioning

confidence: 99%

The (Home) Bias of European Central Bankers: New Evidence Based on Speeches

Bennani

Neuenkirch

2014

SSRN Journal

View full text Add to dashboard Cite

show abstract

“…As in Apel and Grimaldi (2012), we also compute a net index, to determine if a speech is on average more hawkish, dovish, or possibly neutral. We calculate the net index by…”

Section: Policy Speeches: Linguistic Analysismentioning

confidence: 99%

“…We collect all speeches for members of the FOMC from http://www.federalreserve.gov/newsevents/. To classify the tone of speeches, we use a "search-and-count" approach as in Apel and Grimaldi (2012). Search-and-classify is an automated method to classify text into categories.…”

Section: Linguistic Speech Classificationmentioning

confidence: 99%

Monetary Policy and the Stock Market: Time-Series Evidence

Neuhierl

Weber

2016

SSRN Journal

View full text Add to dashboard Cite

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. We construct a slope factor from changes in federal funds futures of different horizons. Slope predicts stock returns at the weekly frequency: faster monetary policy easing positively predicts excess returns. Investors can achieve increases in weekly Sharpe ratios of 20% conditioning on the slope factor. The tone of speeches by the FOMC chair correlates with the slope factor. Slope predicts changes in future interest rates and forecast revisions of professional forecasters. Our findings show that the path of future interest rates matters for asset prices, and monetary policy affects asset prices throughout the year and not only at FOMC meetings. Terms of use: Documents in EconStor mayJEL-Codes: E310, E430, E440, E520, E580, G120.Keywords: return predictability, policy speeches, expected returns, macro news. Andreas Neuhierl I IntroductionThe FOMC will, of course, carefully deliberate about when to begin the process of removing policy accommodation. But the significance of this decision should not be overemphasized, because what matters for financial conditions and the broader economy is the entire expected path of short-term interest rates and not the precise timing of the first rate increase.Janet L. Yellen (2015) ...policy deliberations happen on a rather continuous basis. Kevin Warsh (2015)The main objectives of the Federal Reserve (Fed) under its dual mandate are price stability and maximum employment. The Fed funds rate is the Fed's main conventional policy tool to achieve those goals. But whereas real consumption, investment, and GDP only respond with a lag to changes in the target rate, asset prices respond directly and immediately.Yellen's quote, however, highlights that asset prices might react not only to changes in short-term interest rates, but also to changes in expectations about the speed of monetary policy loosening and tightening. Previous governor Warsh, instead, stresses that monetary policy decisions happen continuously rather than only on eight scheduled Federal Open Market Committee (FOMC) meetings that are the focus of a large event study literature.We use weekly changes in the one-month and three-month federal funds futuresimplied rates to test for the effect of changes in the future path of monetary policy on asset prices throughout the year.1 Specifically, we argue that changes in one-month futures, f f t,1 , affect all future target rates, and we can interpret it as a level factor.Changes in the three-month futures, f f t,3 ...

show abstract

The Information Content of Central Bank Minutes

Cited by 63 publications

References 31 publications

Shocking Language: Understanding the Macroeconomic Effects of Central Bank Communication

Shocking Language: Understanding the Macroeconomic Effects of Central Bank Communication

The (Home) Bias of European Central Bankers: New Evidence Based on Speeches

Monetary Policy and the Stock Market: Time-Series Evidence

Contact Info

Product

Resources

About