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Empirical Assessment of the Impact of Monetary Policy Communication on the Financial Market

Author

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  • Masahiko Shibamoto

    (Research Institute for Economics & Business Administration (RIEB), Kobe University, Japan)

Abstract

This paper proposes an empirical framework to explore the role of monetary policy communication. We develop an econometric methodology to impose restrictions for the identification of communication effects distinct from the effects of policy decisions. The empirical results support the hypothesis that both policy decision and communication factors are required to adequately capture the financial market reactions to monetary policy news. By applying a text mining approach focused on phrases that appear in press conferences on policy meeting days, we find that the communication factors identified are characterized by the policy intentions and preferences of the central bank.

Suggested Citation

  • Masahiko Shibamoto, 2016. "Empirical Assessment of the Impact of Monetary Policy Communication on the Financial Market," Discussion Paper Series DP2016-19, Research Institute for Economics & Business Administration, Kobe University.
    • Handle: RePEc:kob:dpaper:dp2016-19
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    File URL: https://www.rieb.kobe-u.ac.jp/academic/ra/dp/English/DP2016-19.pdf
    File Function: First version, 2016
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    References listed on IDEAS

    as
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    Cited by:

    1. Yusuke Oshima & Yoichi Matsubayashi, 2018. "Monetary Policy Communication of the Bank of Japan: Computational Text Analysis," Discussion Papers 1816, Graduate School of Economics, Kobe University.
    2. Nakamura, Fumitaka & Sudo, Nao & Sugisaki, Yu, 2024. "Assessing monetary policy surprises in Japan by high frequency identification," Journal of the Japanese and International Economies, Elsevier, vol. 71(C).
    3. Fumitaka Nakamura & Nao Sudo & Yu Sugisaki, 2021. "A Quest for Monetary Policy Shocks in Japan by High Frequency Identification," IMES Discussion Paper Series 21-E-02, Institute for Monetary and Economic Studies, Bank of Japan.

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    More about this item

    Keywords

    Monetary policy communication; Policy surprise; Financial market; Event study; Text mining;
    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
    • C30 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - General

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