Deciphering Federal Reserve Communication via Text Analysis of Alternative FOMC Statements

Taeyoung Doh, Dongho Song and Shu-Kuei Yang

American Economic Journal: Macroeconomics, 2026, vol. 18, issue 3, 379-412

Abstract: We propose a text-based measure of monetary policy stance that models FOMC statements as convex combinations of dovish and hawkish alternatives, providing a tractable representation of the Committee's position along the policy spectrum. Leveraging staff-drafted alternative statements, we fine-tune a pretrained language model to capture both quantitative precision and semantic tone. Stance is defined as the product of tone and novelty, and decomposed into expected and surprise components using high-frequency financial data. Surprises arise from shifts in tone relative to expectations or from statement novelty. Our framework enables counterfactuals showing how alternative communication could have moved markets.

JEL-codes: D83 D84 E31 E32 E43 E52 E58 (search for similar items in EconPapers)
Date: 2026
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DOI: 10.1257/mac.20220312

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