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Exploring the informativeness and drivers of tone during committee meetings: The case of the Federal Reserve

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  • Bennani, Hamza
  • Romelli, Davide

Abstract

This paper examines the informativeness and drivers of the tone used by FOMC members to gain insights into the decision-making process of the FOMC. We use a bag-of-words approach to measure the tone of transcripts at the speaker-meeting-round level from 1992-2009 and find persistent differences in tone among FOMC members. We also document how Presidents of regional Federal Reserve Banks use a more volatile and positive tone than the Federal Reserve Bank Board of Governors members. Next, we investigate whether the tone used during FOMC deliberations is associated with future monetary policy decisions and study the drivers of differences in tone among FOMC members. Our results suggest that tone is useful in predicting future policy decisions and that differences in tone are mainly associated with the differences in the individual inflation projections of FOMC members.

Suggested Citation

  • Bennani, Hamza & Romelli, Davide, 2024. "Exploring the informativeness and drivers of tone during committee meetings: The case of the Federal Reserve," Journal of International Money and Finance, Elsevier, vol. 148(C).
    • Handle: RePEc:eee:jimfin:v:148:y:2024:i:c:s0261560624001487
    DOI: 10.1016/j.jimonfin.2024.103161
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    More about this item

    Keywords

    Central banks; Federal Reserve; FOMC; Monetary policy committees; Text analysis;
    All these keywords.

    JEL classification:

    • 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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