Deciphering Monetary Policy Board Minutes Through Text Mining Approach: The Case of Korea

62 Pages Posted: 9 Jan 2019

See all articles by Ki Young Park

Ki Young Park

Yonsei University

Young Joon Lee

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

Soohyon Kim

The Bank of Korea

Date Written: January 7, 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 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, E58

Suggested Citation

Park, Ki Young and Lee, Young Joon and Kim, Soohyon, Deciphering Monetary Policy Board Minutes Through Text Mining Approach: The Case of Korea (January 7, 2019). Bank of Korea WP 2019-1. Available at SSRN: https://ssrn.com/abstract=3312561 or http://dx.doi.org/10.2139/ssrn.3312561

Ki Young Park (Contact Author)

Yonsei University ( email )

Yonsei University
Seoul
Korea, Republic of (South Korea)

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)

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