- 19 December 2022
- WORKING PAPER SERIES - No. 2759Details
- Is there a systematic mapping between the Federal Reserve’s expectations of macro variables and the words it uses to talk about the economy? We propose a simple framework that allows us to estimate communication rules in the United States based on text analysis with regularized regressions. We find strong evidence for systematic communication rules that vary over time, with changes in the rule often being associated with changes in the economic environment or with the introduction of a new Fed chair. In the case of the fed funds rate, we also estimate the market’s perception of the Fed’s communication rule and use it to investigate how much of the disagreement between the market and the Fed come from disagreement about the communication rule.
- JEL Code
- E52 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Monetary Policy
E58 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Central Banks and Their Policies
C49 : Mathematical and Quantitative Methods→Econometric and Statistical Methods: Special Topics→Other