Threats to Central Bank Independence: High-Frequency Identification with Twitter

49 Pages Posted: 23 Sep 2019

See all articles by Francesco Bianchi

Francesco Bianchi

Duke University

Howard Kung

London Business School; Centre for Economic Policy Research (CEPR)

Thilo Kind

London Business School

Multiple version iconThere are 2 versions of this paper

Date Written: September 2019

Abstract

This paper presents market-based evidence that President Trump influences expectations about monetary policy. We use tick-by-tick fed funds futures data and a collection of Trump tweets criticizing the conduct of monetary policy and consistently advocating that the Fed lower interest rates. Identification exploits a short time window around the precise timestamp for each tweet. The average effect on the expected fed funds rate is negative and statistically significant, with an average cumulative effect of around -10 bps and a peak of -18.5 bps at the longest horizon. We conclude that market participants do not perceive the Fed as fully independent.

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Suggested Citation

Bianchi, Francesco and Kung, Howard and Kind, Thilo, Threats to Central Bank Independence: High-Frequency Identification with Twitter (September 2019). NBER Working Paper No. w26308. Available at SSRN: https://ssrn.com/abstract=3458233

Francesco Bianchi (Contact Author)

Duke University ( email )

100 Fuqua Drive
Durham, NC 27708-0204
United States

Howard Kung

London Business School ( email )

Sussex Place
Regent's Park
London NW1 4SA
United Kingdom

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Thilo Kind

London Business School ( email )

Sussex Place
Regent's Park
London, London NW1 4SA
United Kingdom

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