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Coordinating the Message: Media Coverage of Fed News and Market Reactions

Author

Listed:
  • Sylvérie Herbert
  • Klodiana Istrefi
  • Béatrice Sagna

Abstract

This paper examines the homogeneity in media coverage of the Federal Reserve from 1998 to 2021 and its impact on financial markets. Using a dataset of 350,000 articles from major U.S. outlets, we document three key findings: (i) editorial specialization in Fed-related news; (ii) an increase in homogeneity of both topic and tone around significant Fed events and; (iii) a reduction in market volatility and sensitivity to monetary policy surprises when topic coverage becomes more homogeneous. Notably, this effect reverses when the dominant media focus shifts to stock market-related topics.

Suggested Citation

  • Sylvérie Herbert & Klodiana Istrefi & Béatrice Sagna, 2024. "Coordinating the Message: Media Coverage of Fed News and Market Reactions," Working papers 983, Banque de France.
    • Handle: RePEc:bfr:banfra:983
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    File URL: https://www.banque-france.fr/system/files/2024-12/WP983_0.pdf
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    More about this item

    Keywords

    Monetary Policy; Media Transmission; Central Bank Communication;
    All these keywords.

    JEL classification:

    • C55 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Large Data Sets: Modeling and Analysis
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G1 - Financial Economics - - General Financial Markets

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