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Central bank mandates: How differences can influence the content and tone of central bank communication

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  • Bohl, Martin T.
  • Kanelis, Dimitrios
  • Siklos, Pierre L.

Abstract

Using modern text mining methods, we analyze the influence of central bank mandates on the content and tone of communication via speeches. Relatedly, we also examine empirically how inflation and unemployment expectations affect the tone of speeches relative to past macroeconomic developments. We compare speeches given by senior officials of the Federal Reserve (FED) against ones of the European Central Bank (ECB). We find evidence that the mandate of the central bank does affect speech sentiment. That said, speeches by both central banks display greater similarities before the Great Financial Crisis (GFC), than afterwards. We also find that, especially since the GFC, unemployment expectations drive the tone of FED speeches while inflation expectations influence the tone of ECB speeches.

Suggested Citation

  • Bohl, Martin T. & Kanelis, Dimitrios & Siklos, Pierre L., 2023. "Central bank mandates: How differences can influence the content and tone of central bank communication," Journal of International Money and Finance, Elsevier, vol. 130(C).
    • Handle: RePEc:eee:jimfin:v:130:y:2023:i:c:s0261560622001553
    DOI: 10.1016/j.jimonfin.2022.102752
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    2. Neugebauer, Frederik & Russnak, Jan & Zimmermann, Lilli & Camarero Garcia, Sebastian, 2024. "Effects of the ECB’s communication on government bond spreads," Journal of International Money and Finance, Elsevier, vol. 142(C).
    3. Piroska Nagy Mohacsi & Tatiana Evdokimova & Olga Ponomarenko & Elina Ribakova, 2024. "Emerging Market Central Banking and Communication: The Great Catchup," Financial and Economic Review, Magyar Nemzeti Bank (Central Bank of Hungary), vol. 23(1), pages 29-49.
    4. Dimitrios Kanelis & Pierre L. Siklos, 2022. "Emotion in Euro Area Monetary Policy Communication and Bond Yields: The Draghi Era," CQE Working Papers 10322, Center for Quantitative Economics (CQE), University of Muenster.
    5. de Haan, Jakob & Hoogduin, Lex, 2024. "ECB communication policies: An overview and comparison with the Federal Reserve," Journal of International Money and Finance, Elsevier, vol. 142(C).
    6. Raghavendra, Ananya Hadadi & Bala, Pradip Kumar & Mukherjee, Arindam, 2024. "Text mining analysis of retail and consumer service leaders' sustainability narratives: Are they actually true?," Journal of Retailing and Consumer Services, Elsevier, vol. 80(C).

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    More about this item

    Keywords

    Expectations; Inflation; Central Bank Mandates; Speeches; Structural Topic Model; Unemployment;
    All these keywords.

    JEL classification:

    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • 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

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