Shocking language: Understanding the macroeconomic effects of central bank communication

Michael McMahon and Stephen Hansen

No 11018, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We explore how the multi-dimensional aspects of information released by the FOMC has effects on both market and real economic variables. Using tools from computational linguistics, we measure the information released by the FOMC on the state of economic conditions, as well as the guidance the FOMC provides about future monetary policy decisions. Employing these measures within a FAVAR framework, we find that shocks to forward guidance are more important than the FOMC communication of current economic conditions in terms of their effects on market and real variables. Nonetheless, neither communication has particularly strong effects on real economic variables.

Keywords: Communication; Monetary policy; Vector autoregression (search for similar items in EconPapers)
JEL-codes: E52 E58 (search for similar items in EconPapers)
Date: 2015-12
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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Citations: View citations in EconPapers (14)

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Related works:
Chapter: Shocking Language: Understanding the Macroeconomic Effects of Central Bank Communication (2016)
Journal Article: Shocking language: Understanding the macroeconomic effects of central bank communication (2016)
Working Paper: Shocking language: understanding the macroeconomic effects of central bank communication (2016)
Working Paper: Shocking language: Understanding the macroeconomic effects of central bank communication (2015)
Working Paper: Shocking Language: Understanding the macroeconomic effects of central bank communication (2015)
Working Paper: Shocking language: Understanding the macroeconomic effects of central bank communication (2015)
Working Paper: Shocking language: Understanding the macroeconomic effects of central bank communication (2015)
Working Paper: Shocking language: Understanding the macroeconomic effects of central bank communication (2015)
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