The Voice of Monetary Policy

Yuriy Gorodnichenko, Tho Pham, Oleksandr Talavera

Research output: Contribution to journalArticlepeer-review

Abstract

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 Fed’s actions and the sentiment in policy texts, a positive tone in the voices of Fed 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.
Original languageEnglish
Pages (from-to)548-584
JournalAmerican Economic Review
Volume113
Issue number2
DOIs
Publication statusPublished - 1 Feb 2023

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