The Voice of Monetary Policy

48 Pages Posted: 22 Mar 2021 Last revised: 15 Feb 2023

See all articles by Yuriy Gorodnichenko

Yuriy Gorodnichenko

University of California, Berkeley - Department of Economics; National Bureau of Economic Research (NBER); IZA Institute of Labor Economics

Tho Pham

University of Reading

Oleksandr Talavera

University of Birmingham

Multiple version iconThere are 2 versions of this paper

Date Written: March 2021

Abstract

We develop a deep learning model to detect emotions embedded in press conferences after the meetings of the Federal Open Market Committee 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, positive tone in the voices of Fed Chairs leads to statistically significant and economically large increases in share prices. In other words, how policy messages are communicated can move the stock market. In contrast, the bond market appears to take few vocal cues from the Chairs. Our results provide implications for improving the effectiveness of central bank communications.

Suggested Citation

Gorodnichenko, Yuriy and Pham, Tho and Talavera, Oleksandr, The Voice of Monetary Policy (March 2021). NBER Working Paper No. w28592, Available at SSRN: https://ssrn.com/abstract=3809564

Yuriy Gorodnichenko (Contact Author)

University of California, Berkeley - Department of Economics ( email )

549 Evans Hall #3880
Berkeley, CA 94720-3880
United States

HOME PAGE: http://www.econ.berkeley.edu/~ygorodni/index.htm

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Tho Pham

University of Reading ( email )

Whiteknights
Reading, Berkshire RG6 6AH
United Kingdom

Oleksandr Talavera

University of Birmingham ( email )

Edgbaston, Birmingham B15 2TT
United Kingdom

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
51
Abstract Views
348
Rank
693,765
PlumX Metrics