Financial Stability and the Fed: Evidence from Congressional Hearings

Arina Wischnewsky, David-Jan Jansen and Matthias Neuenkirch

VfS Annual Conference 2020 (Virtual Conference): Gender Economics from Verein für Socialpolitik / German Economic Association

Abstract: This paper retraces how financial stability considerations interacted with U.S. monetary policy before and during the Great Recession. Using text-mining techniques, we construct indicators for financial stability sentiment expressed during testimonies of four Federal Reserve Chairs at Congressional hearings. Including these text-based measures adds explanatory power to Taylor-rule models. In particular, negative financial stability sentiment coincided with a more accommodative monetary policy stance than implied by standard Taylorrule factors, even in the decades before the Great Recession. These findings are consistent with a preference for monetary policy reacting to financial instability 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)
Date: 2020
New Economics Papers: this item is included in nep-mac and nep-mon
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https://www.econstor.eu/bitstream/10419/224527/1/vfs-2020-pid-38739.pdf (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)
Working Paper: Financial Stability and the Fed: Evidence fromCongressional Hearings (2019)
Working Paper: Financial Stability and the Fed: Evidence from Congressional Hearings (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc20:224527

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