Shocking language: Understanding the macroeconomic effects of central bank communication

Stephen Hansen and Michael McMahon

CAGE Online Working Paper Series from Competitive Advantage in the Global Economy (CAGE)

Abstract: We explore how the multi-dimensional aspects of information released by the FOMC has effects on both market and real economic variables. Using tools from computational linguistics, we measure the information released by the FOMC on the state of economic conditions, as well as the guidance the FOMC provides about future monetary policy decisions. Employing these measures within a FAVAR framework, we find that shocks to forward guidance are more important than the FOMC communication of current economic conditions in terms of their effects on market and real variables. Nonetheless, neither communication has particularly strong effects on real economic variables.

Keywords: Monetary policy; communication; Vector Autoregression. JEL Classification: E52, E58 (search for similar items in EconPapers)
Date: 2015
New Economics Papers: this item is included in nep-mac
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Citations: View citations in EconPapers (14)

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http://www2.warwick.ac.uk/fac/soc/economics/resear ... 258-2015_mcmahon.pdf

Related works:
Chapter: Shocking Language: Understanding the Macroeconomic Effects of Central Bank Communication (2016)
Journal Article: Shocking language: Understanding the macroeconomic effects of central bank communication (2016)
Working Paper: Shocking language: understanding the macroeconomic effects of central bank communication (2016)
Working Paper: Shocking language: Understanding the macroeconomic effects of central bank communication (2015)
Working Paper: Shocking Language: Understanding the macroeconomic effects of central bank communication (2015)
Working Paper: Shocking language: Understanding the macroeconomic effects of central bank communication (2015)
Working Paper: Shocking language: Understanding the macroeconomic effects of central bank communication (2015)
Working Paper: Shocking language: Understanding the macroeconomic effects of central bank communication (2015)
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