Between hawks and doves: measuring central bank communication

Ellen Tobback, Stefano Nardelli and David Martens

No 2085, Working Paper Series from European Central Bank

Abstract: We propose a Hawkish-Dovish (HD) indicator that measures the degree of ‘hawkishness’ or ‘dovishness’ of the media’s perception of the ECB’s tone at each press conference. We compare two methods to calculate the indicator: semantic orientation and Support Vector Machines text classification. We show that the latter method tends to provide more stable and accurate measurements of perception on a labelled test set. Furthermore, we demonstrate the potential use of this indicator with several applications: we perform a correlation analysis with a set of interest rates, use Latent Dirichlet Allocation to detect the dominant topics in the news articles, and estimate a set of Taylor rules. The findings provide decisive evidence in favour of using an advanced text mining classification model to measure the medias perception and the Taylor rule application confirms that communication plays a significant role in enhancing the accuracy when trying to estimate the bank’s reaction function. JEL Classification: C02, C63, E52, E58

Keywords: communication; data mining; monetary policy; quantitative methods (search for similar items in EconPapers)
Date: 2017-07
New Economics Papers: this item is included in nep-cba, nep-eec, nep-mac and nep-mon
Note: 652214
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (36)

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