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The Voice of Monetary Policy

Yuriy Gorodnichenko, Tho Pham and Oleksandr Talavera

No 15932, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We develop a deep learning model to detect emotions embedded in press conferences after the meetings of the Federal Open Market Committee and examine the influence of the detected emotions on financial markets. We find that, after controlling for the Fed's actions and the sentiment in policy texts, positive tone in the voices of Fed Chairs leads to statistically significant and economically large increases in share prices. In other words, how policy messages are communicated can move the stock market. In contrast, the bond market appears to take few vocal cues from the Chairs. Our results provide implications for improving the effectiveness of central bank communications.

Keywords: Bond market; communication; Emotion; monetary policy; Stock market; text sentiment; voice (search for similar items in EconPapers)
JEL-codes: D84 E31 E58 G12 (search for similar items in EconPapers)
Date: 2021-03
New Economics Papers: this item is included in nep-big, nep-mac and nep-mon
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Working Paper: The Voice of Monetary Policy (2021) Downloads
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