The voice of monetary policy by Yuriy Gorodnichenko, Tho Pham and Oleksandr Talavera
By: Gorodnichenko, Yuriy
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Contributor(s): Pham, Tho | Talavera, Oleksandr.
Material type: 
ArticleSubject(s): MERCADOS FINANCIEROS | POLITICA MONETARIA | INFORMACIONES FINANCIERAS | COMUNICACION | ASPECTOS PSICOLOGICOS | ESTADOS UNIDOS
In:
The American Economic Review v. 113, n. 2, Fabruary 2023, p. 279-316Summary: We develop a deep learning model to detect emotions embedded in press conferences after the Federal Open Market Committee meetings and examine the influence of the detected emotions on financial markets. We find that, after controlling for the Federal Reserve's actions and the sentiment in policy texts, a positive tone in the voices of Federal Reserve chairs leads to significant increases in share prices. Other financial variables also respond to vocal cues from the chairs. Hence, how policy messages are communicated can move the financial market. Our results provide implications for improving the effectiveness of central bank communications.
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Resumen.
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We develop a deep learning model to detect emotions embedded in press conferences after the Federal Open Market Committee meetings and examine the influence of the detected emotions on financial markets. We find that, after controlling for the Federal Reserve's actions and the sentiment in policy texts, a positive tone in the voices of Federal Reserve chairs leads to significant increases in share prices. Other financial variables also respond to vocal cues from the chairs. Hence, how policy messages are communicated can move the financial market. Our results provide implications for improving the effectiveness of central bank communications.
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