Deciphering Monetary Policy Committee Minutes with Text Mining Approach: A Case of South Korea

42 Pages Posted: 31 Aug 2018 Last revised: 16 Sep 2018

See all articles by Youngjoon Lee

Youngjoon Lee

Yonsei University - School of Business

Soohyon Kim

The Bank of Korea

Ki Young Park

Yonsei University

Date Written: September 3, 2018

Abstract

We quantify the Monetary Policy Committee (MPC) minutes of the Bank of Korea (BOK) using text mining approach. We propose a novel approach using a field-specific Korean dictionary and contiguous sequence of words (n-grams) to better capture the subtlety of central bank communication. We find that our lexicon-based indicators help explain the current and future BOK monetary policy decisions when considering an augmented Taylor rule, suggesting that they contain additional information beyond the currently available macroeconomic variables. Our indicators remarkably outperform English-based textual classifications, a media-based measure of economic policy uncertainty, and a data-based measure of macroeconomic uncertainty. Our empirical results also emphasize the importance of using a field-specific dictionary and the original Korean text.

Keywords: monetary policy, text mining, central banking, Bank of Korea, Taylor rule

JEL Classification: E43, E52

Suggested Citation

Lee, Youngjoon and Kim, Soohyon and Park, Ki Young, Deciphering Monetary Policy Committee Minutes with Text Mining Approach: A Case of South Korea (September 3, 2018). Available at SSRN: https://ssrn.com/abstract=3237909 or http://dx.doi.org/10.2139/ssrn.3237909

Youngjoon Lee

Yonsei University - School of Business ( email )

50 Yonsei-ro, Seodaemun-gu
Seoul, 03722
Korea, Republic of (South Korea)

Soohyon Kim

The Bank of Korea ( email )

39, Namdaemun-ro, Jung-gu
Seoul, 04531
Korea, Republic of (South Korea)

Ki Young Park (Contact Author)

Yonsei University ( email )

Yonsei University
Seoul
Korea, Republic of (South Korea)

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