Seeing the forest for the trees: Using hLDA models to evaluate communication in Banco Central do Brasil

Angelo Fasolo, Flávia M Graminho and Saulo B Bastos

No 1021, BIS Working Papers from Bank for International Settlements

Abstract: Central bank communication is a key tool in managing inflation expectations. This paper proposes a hierarchical Latent Dirichlet Allocation (hLDA) model combined with feature selection techniques to allow an endogenous selection of topic structures associated with documents published by Banco Central do Brasil's Monetary Policy Committee (Copom). These computational linguistic techniques allow building measures of the content and tone of Copom's minutes and statements. The effects of the tone are measured in different dimensions such as inflation, inflation expectations, economic activity, and economic uncertainty. Beyond the impact on the economy, the hLDA model is used to evaluate the coherence between the statements and the minutes of Copom's meetings.

Keywords: communication; monetary policy; latent dirichlet allocation; Brazil; Central Bank (search for similar items in EconPapers)
JEL-codes: E02 E21 E22 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2022-06
New Economics Papers: this item is included in nep-mon
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Related works:
Working Paper: Seeing the Forest for the Trees: using hLDA models to evaluate communication in Banco Central do Brasil (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:bis:biswps:1021

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