Spread the Word: International Spillovers from Central Bank Communication
55 Pages Posted: 13 Dec 2019
Date Written: December 2, 2019
We construct a novel text dataset to measure the sentiment component of communications for 23 central banks over the 2002-2017 period. Our analysis yields three results. First, comovement in sentiment across central banks is not reducible to trade or financial flow exposures. Second, sentiment shocks generate cross-country spillovers in sentiment, policy rates, and macroeconomic variables; and the Fed appears to be a uniquely influential generator of such spillovers, even among prominent central banks. And third, geographic distance is a robust and economically significant determinant of comovement in central bank sentiment, while shared language and colonial ties have weaker predictive power.
Keywords: communication, monetary policy, international policy transmission
JEL Classification: E52, E58, F42
Suggested Citation: Suggested Citation