Communication, monetary policy, and financial markets in Mexico

Ana Aguilar and Fernando Pérez-Cervantes

No 1025, BIS Working Papers from Bank for International Settlements

Abstract: We determine if the communication of private banks to their clients with financial interests in Mexico changes or not after Mexico's Central Bank communicates its monetary policy decision (MPD) and also two weeks later, with the publication of the minutes of Mexico's Central Bank monetary policy decision (MMPD) between 2011 and 2019. We use unsupervised Natural Language Processing (NLP) techniques to turn the text that private banks send to their clients about the Mexican economy into vectors of topics. We find that every time, private banks cover a large diversity of topics and words before the MMPD with no evident consensus of topics, and that almost always the quantities of terms and topics are reduced and repeated by almost every bank after the MMPD indicating some surprise (notable exception: the liftoff in December 2015), and that the topics vary depending on the date of the MMPD. The fact that private banks discuss the same topics and write to their clients with sentences that contain the exact same words indicates that the private banks react to the MMPD, independent of their opinion about the Central Bank's statements. We also found weak evidence that a measure of the size of the changes in the private bank's communication with their clients is positively correlated to changes in the long-term yields but negatively correlated to the size of exchange rate movements.

Keywords: natural language processing; unsupervised sentence embedding; central bank communication; Mexico (search for similar items in EconPapers)
JEL-codes: C6 E5 E6 (search for similar items in EconPapers)
Pages: 46 pages
Date: 2022-06
New Economics Papers: this item is included in nep-ban, nep-big, nep-cba and nep-mon
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