More Than Words: Fed Chairs’ Communication During Congressional Testimonies

Michelle Alexopoulos, Xinfen Han, Oleksiy Kryvtsov and Xu Zhang

Staff Working Papers from Bank of Canada

Abstract: We measure soft information contained in the congressional testimonies of U.S. Federal Reserve Chairs and analyze its effect on financial markets. Our measures of Fed Chairs’ emotions expressed in words, voice and facial expressions are created using machine learning. Increases in the Chair’s text-, voice-, or face-emotion indices during these testimonies generally raise the SandP500 index and lower the VIX—indicating that these cues help shape market responses to Fed communications. These effects add up and propagate after the testimony, reaching magnitudes comparable to those after a policy rate cut. Markets respond most to the Chair’s emotions expressed about issues related to monetary policy.

Keywords: Central bank research; Financial markets; Monetary policy communications (search for similar items in EconPapers)
JEL-codes: E52 E58 E71 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2022-05
New Economics Papers: this item is included in nep-ban, nep-big, nep-cba, nep-cmp, nep-mac and nep-mon
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: More than words: Fed Chairs’ communication during congressional testimonies (2024)
Working Paper: More Than Words: Fed Chairs' Communications During Congressional Testimonies (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:bca:bocawp:22-20

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