Estimating Central Bank Preferences Combining Topic and Scaling Methods

Scholars often use Federal Open Market Committee (FOMC) votes to estimate the preferences of central bankers. However, rarely do committee members on the FOMC cast dissenting votes. This article demonstrates the usefulness of using what central bankers say in FOMC meetings rather than how they vote to better measure central bank preferences. Using automated text analysis tools and scaling methods, we develop a new measure of central bank preferences on the FOMC leading up to the financial crisis (2005 - 2008).