Emotion in Euro Area Monetary Policy Communication and Bond Yields: The Draghi Era

Dimitrios Kanelis and Pierre Siklos

CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University

Abstract: We combine modern methods from Speech Emotion Recognition and Natural Language Processing with high-frequency financial data to precisely analyze how the vocal emotions and language of ECB President Mario Draghi affect the yields and yield spreads of major euro area economies. This novel approach to central bank communication reveals that vocal and verbal emotions significantly impact the yield curve, with effects varying in magnitude and direction. Positive signals raise German and French yields, while negative signals increase Italian yields. Our analysis of bond spreads indicates that positive communication influences the risk-free yield component, whereas negative communication affects the risk premium. Additionally, our study contributes by constructing a synchronized dataset for voice and language analysis.

Keywords: artificial intelligence; asset prices; communication; ECB; high-frequency data; speech emotion recognition (search for similar items in EconPapers)
JEL-codes: E50 E58 G12 G14 (search for similar items in EconPapers)
Pages: 60 pages
Date: 2022-12, Revised 2024-06
New Economics Papers: this item is included in nep-big
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Citations: View citations in EconPapers (2)

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https://cama.crawford.anu.edu.au/sites/default/fil ... ised_june_2024_0.pdf Revised Version (application/pdf)
https://cama.crawford.anu.edu.au/sites/default/fil ... ginal_dec_2022_0.pdf Original Version (application/pdf)

Related works:
Working Paper: Emotion in Euro Area Monetary Policy Communication and Bond Yields: The Draghi Era (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:een:camaaa:2022-75

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