Whatever it takes to understand a central banker: Embedding their words using neural networks

Martin Baumgärtner and Johannes Zahner

No 194, IMFS Working Paper Series from Goethe University Frankfurt, Institute for Monetary and Financial Stability (IMFS)

Abstract: Dictionary approaches are at the forefront of current techniques for quantifying central bank communication. This paper proposes embeddings - a language model trained using machine learning techniques - to locate words and documents in a multidimensional vector space. To accomplish this, we utilize a text corpus that is unparalleled in size and diversity in the central bank communication literature, as well as introduce a novel approach to text quantification from computational linguistics. This allows us to provide high-quality central bank-specific textual representations and demonstrate their applicability by developing an index that tracks deviations in the Fed's communication towards inflation targeting. Our findings indicate that these deviations in communication significantly impact monetary policy actions, substantially reducing the reaction towards inflation deviation in the US.

Keywords: Word Embedding; Neural Network; Central Bank Communication; Natural Language Processing; Transfer Learning (search for similar items in EconPapers)
JEL-codes: C45 C53 E52 Z13 (search for similar items in EconPapers)
Date: 2023
New Economics Papers: this item is included in nep-ban, nep-big, nep-cmp and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/280939/1/1876989661.pdf (application/pdf)

Related works:
Working Paper: Whatever it Takes to Understand a Central Banker – Embedding their Words Using Neural Networks (2022)
Working Paper: Whatever it takes to understand a central banker - Embedding their words using neural networks (2021)
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:zbw:imfswp:280939

Access Statistics for this paper

More papers in IMFS Working Paper Series from Goethe University Frankfurt, Institute for Monetary and Financial Stability (IMFS) Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().