Financial Stability and the Fed: Evidence from Congressional Hearings
David-Jan Jansen and
Matthias Neuenkirch ()
DNB Working Papers from Netherlands Central Bank, Research Department
This paper retraces how financial stability considerations interacted with U.S. monetary policy before and during the Great Recession. Using text-mining techniques, we construct indicators for financial stability sentiment expressed during testimonies of four Federal Reserve Chairs at Congressional hearings. Including these text-based measures adds explanatory power to Taylor-rule models. In particular, negative financial stability sentiment coincided with a more accommodative monetary policy stance than implied by standard Taylor-rule factors, even in the decades before the Great Recession. These findings are consistent with a preference for monetary policy reacting to financial instability rather than acting pre-emptively to a perceived build-up of risks.
Keywords: monetary policy; financial stability; Taylor rule; text mining (search for similar items in EconPapers)
JEL-codes: E52 E58 N12 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-his, nep-mac and nep-mon
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Working Paper: Financial stability and the Fed: evidence from congressional hearings (2019)
Working Paper: Financial Stability and the Fed: Evidence from Congressional Hearings (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:dnb:dnbwpp:633
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