Deciphering Monetary Policy Board Minutes with Text Mining: The Case of South Korea

46 Pages Posted: 31 Aug 2018 Last revised: 2 Feb 2019

See all articles by Young Joon Lee

Young Joon Lee

Stanford University - Precourt Institute for Energy; Yonsei University - Yonsei Business Research Institute

Soohyon Kim

The Bank of Korea

Ki Young Park

Yonsei University

Date Written: January 31, 2019

Abstract

We quantify the Monetary Policy Board (MPB) minutes of the Bank of Korea (BOK) using text mining. We propose a novel approach using a field-specific Korean dictionary and contiguous sequences of words (n-grams) to better capture the subtlety of central bank communications. We find that our text-based indicator helps 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. In terms of explaining the current and future monetary policy decisions, our indicator remarkably outperforms 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, Young Joon and Kim, Soohyon and Park, Ki Young, Deciphering Monetary Policy Board Minutes with Text Mining: The Case of South Korea (January 31, 2019). Available at SSRN: https://ssrn.com/abstract=3237909 or http://dx.doi.org/10.2139/ssrn.3237909

Young Joon Lee

Stanford University - Precourt Institute for Energy ( email )

473 Via Ortega, Suite 324
Stanford University
Stanford, CA 94305
United States

HOME PAGE: http://energy.stanford.edu

Yonsei University - Yonsei Business Research Institute ( email )

50 Yonsei-ro, Seodaemun-gu
Yonsei University
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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