Fed Communication on Financial Stability Concerns and Monetary Policy Decisions: Revelations from Speeches

49 Pages Posted: 1 Apr 2021

Multiple version iconThere are 2 versions of this paper

Date Written: March 29, 2021

Abstract

This paper studies the informational content of speeches of Fed officials, focusing on financial stability, from 1997 to 2018. We construct indicators that measure the intensity and tone of this topic for both Governors and Fed presidents. When added to a standard forward-looking Taylor rule, a higher topic intensity or negative tone is associated with more monetary policy accommodation than implied by the state of the economy. Our results are mainly driven by the information in speeches of Fed presidents. We discuss several channels to rationalize this finding.

Keywords: monetary policy, Federal Reserve, financial stability, communication

JEL Classification: E03, E50, E61

Suggested Citation

Istrefi, Klodiana and Odendahl, Florens and Sestieri, Giulia, Fed Communication on Financial Stability Concerns and Monetary Policy Decisions: Revelations from Speeches (March 29, 2021). Banco de Espana Working Paper No. 2110, Available at SSRN: https://ssrn.com/abstract=3816390 or http://dx.doi.org/10.2139/ssrn.3816390

Klodiana Istrefi (Contact Author)

Banque de France ( email )

Paris
France

Florens Odendahl

Banque de France ( email )

Paris
France

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