The voice of monetary policy

Gorodnichenko, Y., Pham, T. and Talavera, O. (2023) The voice of monetary policy. American Economic Review, 113 (2). pp. 548-584. ISSN 0002-8282 doi: 10.1257/aer.20220129

Abstract/Summary

We develop a deep learning model to detect emotions embedded in press conferences after the Federal Open Market Committee meetings and examine the influence of the detected emotions on financial markets. We find that, after controlling for the Fed’s actions and the sentiment in policy texts, a positive tone in the voices of Fed chairs leads to significant increases in share prices. Other financial variables also respond to vocal cues from the chairs. Hence, how policy messages are communicated can move the financial market. Our results provide implications for improving the effectiveness of central bank communications.

Item Type	Article
URI	https://centaur.reading.ac.uk/id/eprint/109359
Identification Number/DOI	10.1257/aer.20220129
Refereed	Yes
Divisions	Arts, Humanities and Social Science > School of Politics, Economics and International Relations > Economics
Publisher	American Economic Association
Download/View statistics	View download statistics for this item