This paper investigates the responsiveness of US equity sectors to the sentiments conveyed by the speeches of the governors of the US Federal Reserve (the Fed). Using principal component analysis of the scores of four Lexicon dictionaries to analyze speeches from June 1, 1996, to September 30,...

During the post-pandemic inflation surge, many central banks actively used communication about the inflation outlook as a policy tool to limit spillovers from realized to expected inflation. We present novel survey evidence showing that the ECB's guidance about the projected inflation path...

We analyze how financial stability concerns discussed during Federal Open Market Committee (FOMC) meetings influence the Federal Reserve's monetary policy imple- mentation and communication. Utilizing large language models (LLMs) to analyze FOMC minutes from 1993 to 2022, we measure both...

Word embeddings are vectors of real numbers associated with words, designed to capture semantic and syntactic similarity between the words in a corpus of text. We estimate the word embeddings of the European Central Bank's introductory statements at monetary policy press conferences by using a...

Professional forecasters' long-run inflation expectations overreact to news and exhibit persistent, predictable biases in forecast errors. A model incorporating overconfidence in private information and a persistent expectations bias-which generates persistent forecast errors across most...

This paper examines the impact of political polarization on public trust in the Fed and its influence on macroeconomic expectations. Using a large-scale survey experiment which we fielded on President Trump’s 2025 inauguration day, we study how households form beliefs about the Fed regarding...

This report presents an analysis of the Central Bank of the Republic of Azerbaijan's (CBA) communication framework and offers recommendations for enhancement. The technical assistance mission, led by the IMF Monetary and Capital Markets Department, aimed to modernize the CBA's communication...

We study the evolution of the European Central Bank's (ECB) monetary policy since July 2021, following the adoption of a new strategy and amid a period of volatile inflation. Utilizing text analysis, we assess changes in the general sentiment of the ECB's communication. Additionally, we employ...

Central bank communication has become a crucial tool for steering the monetary policy stance and shaping the outlook of market participants. Traditionally, analyzing central bank communication required substantial human effort, expertise, and resources, making the process time-consuming. The...

This briefing report evaluates the ECB's monetary policy in a context of declining inflation and stagnant growth. Inflation risks have been averted and, after a period of relatively tight policy in 2024, benchmark comparisons indicate that the current interest rate is consistent with the ECB's...

This briefing report evaluates the ECB's monetary policy in a context of declining inflation and stagnant growth. Inflation risks have been averted and, after a period of relatively tight policy in 2024, benchmark comparisons indicate that the current interest rate is consistent with the ECB's...

One of the main goals of launching the EU's second Markets in Financial Instruments Directive (MiFID II) and the respective Markets in Financial Instruments Regulation (MiFIR) was to increase the transparency of transactions in financial markets. Prior to MiFID II, transparency requirements in...

We examine how speeches by Federal Open Market Committee (FOMC) members, including regional Fed presidents, shape private sector expectations. Speeches that signal rising inflationary pressures prompt both households and professional forecasters to raise their inflation expectations, consistent...

We combine modern methods from Speech Emotion Recognition and Natural Language Processing with high-frequency financial data to precisely analyze how the vocal emo- tions and language of ECB President Mario Draghi affect the yields and yield spreads of major euro area economies. This novel...

In this comment, we computationally reproduce the results of Linos et al. (2024), which shows contrary to researcher and practitioner predictions, that formal government communications are more effective at influencing resident behavior than informal government communications. We succeeded in...

Different economic agents might respond differently to the same policy action. Information about household and firm heterogeneity can, therefore, enhance central banks' understanding of monetary policy transmission and ultimately its effectiveness. Cross-sectional data can also help central...

For central banks, official communications serve as essential monetary policy instruments: In press releases, speeches, and interviews, central banks explain their decisions, manage expectations, and promote confidence in their strategy. This Weekly Report analyzes European Central Bank (ECB)...

During the post-pandemic inflation surge, many central banks actively used communication about the inflation outlook as a policy tool to limit spillovers from realized to expected inflation. We present novel survey evidence showing that the ECB's guidance about the projected inflation path...

Transparency in the work of central banks has become one of the key features of monetary policy. Because of this, many economists have diverted to finding the most suitable way to measure it. Although a unique method of measurement has yet to be achieved, there are various studies in the...

This report provides evidence-based insights and recommendations on how public communicators can strengthen democracies by navigating (new) information ecosystems in ways that earn the trust of citizens. At a time when trust in government is increasingly important to democracy, the report aims...

This paper introduces a novel database of text features extracted from the speeches of 53 central banks from 1996 to 2023 using state-of-the-art NLP methods. We establish four facts: (1) central banks with floating and pegged exchange rates communicate differently, and these differences are...

Central bank communication plays a crucial role in the conduct of monetary policy, yet the research on central bank communication, while growing, is still scarce. In this paper, we analyze the communication reaction function of the European Central Bank (ECB) through topic-based indices derived...

Exploiting the heteroscedasticity of the changes in short-term and long-term interest rates and exchange rates around the FOMC announcement, we identify three structural monetary policy shocks. We eliminate the predictable part of the shocks and study their effects on financial variables and...