EconPapers    
Economics at your fingertips  
 

Sentiment in Central Banks' Financial Stability Reports

Ricardo Correa, Keshav Garud, Juan M. Londono () and Nathan Mislang

No 1203, International Finance Discussion Papers from Board of Governors of the Federal Reserve System (U.S.)

Abstract: Using the text of financial stability reports (FSRs) published by central banks, we analyze the relation between the financial cycle and the sentiment conveyed in these official communications. To do so, we construct a dictionary tailored specifically to a financial stability context, which assigns positive and negative connotations based on the sentiment conveyed by words in FSRs. With this dictionary, we construct a financial stability sentiment (FSS) index. Using a panel of 35 countries for the sample period between 2005 and 2015, we find that central banks' FSS indexes are mostly driven by developments in the banking sector and by the indicators that convey information about the health of this sector. We also find that the sentiment captured by the FSS index translates into changes in financial cycle indicators related to credit, asset prices, and systemic risk. Finally, our results show that central banks' sentiment deteriorates just prior to the start of banking crises.

Keywords: Financial stability; central bank communications; Text analysis; Dictionary; Sentiment index (search for similar items in EconPapers)
JEL-codes: G15 G28 (search for similar items in EconPapers)
Pages: 46 pages
Date: 2017-03-21
New Economics Papers: this item is included in nep-cba
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (27) Track citations by RSS feed

Downloads: (external link)
https://www.federalreserve.gov/econres/ifdp/files/ifdp1203.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgif:1203

DOI: 10.17016/IFDP.2017.1203

Access Statistics for this paper

More papers in International Finance Discussion Papers from Board of Governors of the Federal Reserve System (U.S.) Contact information at EDIRC.
Bibliographic data for series maintained by Ryan Wolfslayer ; Keisha Fournillier ().

 
Page updated 2023-02-04
Handle: RePEc:fip:fedgif:1203