Financial Stability and the Fed: Evidence fromCongressional Hearings

Arina Wischnewsky, David-Jan Jansen and Matthias Neuenkirch

No 2019-05, Working Paper Series from University of Trier, Research Group Quantitative Finance and Risk Analysis

Abstract: This paper retraces how financial stability considerations interacted with U.S.monetary policy before and during the Great Recession. Using text-miningtechniques, we construct indicators for financial stability sentiment expressedduring testimonies of four Federal Reserve Chairs at Congressional hearings.Including these text-based measures adds explanatory power to Taylor-rulemodels. In particular, negative financial stability sentiment coincided with amore accommodative monetary policy stance than implied by standard Taylor-rule factors, even in the decades before the Great Recession. These findings areconsistent with a preference for monetary policy reacting to financial instabil-ity rather than acting pre-emptively to a perceived build-up of risks.

Keywords: monetary policy; financial stability; Taylor rule; text mining (search for similar items in EconPapers)
JEL-codes: E52 E58 N12 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2019
New Economics Papers: this item is included in nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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https://www.uni-trier.de/fileadmin/fb4/prof/BWL/FI ... apers/QFRA_19-05.pdf First version, 2019 (application/pdf)

Related works:
Journal Article: Financial stability and the Fed: Evidence from congressional hearings (2021)
Working Paper: Financial stability and the Fed: evidence from congressional hearings (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:trr:qfrawp:201905

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