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Disagreement inside the FOMC: New Insights from Tone Analysis

Author

Listed:
  • Davide Romelli

    (Department of Economics, Trinity College Dublin)

  • Hamza Bennani

    (School of Economics and Management (IAE), University of Nantes)

Abstract

This paper analyses the drivers of divergence in tone among Federal Open Market Committee (FOMC) members using text analysis tools. We use a financial dictionary to measure the tone of FOMC transcripts at the speaker-meeting-round level. We then relate the tone of FOMC members remarks with their individual projections for inflation and unemployment rate. Our results show a positive relationship between inflation projections and the tone used by FOMC members, suggesting that divergence in tone among members is mainly driven by differences in their projected levels of inflation. We also show that Federal Reserve Bank presidents and voting members are those who use a more distinct tone, in particular during the economics go-round.

Suggested Citation

  • Davide Romelli & Hamza Bennani, 2021. "Disagreement inside the FOMC: New Insights from Tone Analysis," Trinity Economics Papers tep1021, Trinity College Dublin, Department of Economics.
    • Handle: RePEc:tcd:tcduee:tep1021
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    File URL: https://www.tcd.ie/Economics/TEP/2021/TEP1021.pdf
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    Cited by:

    1. Donato Masciandaro & Paola Profeta & Davide Romelli, 2023. "Women and Governance: Central Bank Boards and Monetary Policy," Trinity Economics Papers tep1123, Trinity College Dublin, Department of Economics.
    2. Donato Masciandaro & Oana Peia & Davide Romelli, 2024. "Central bank communication and social media: From silence to Twitter," Journal of Economic Surveys, Wiley Blackwell, vol. 38(2), pages 365-388, April.
    3. Hüpper, Florian & Kempa, Bernd, 2023. "Inflation targeting and inflation communication of the Federal Reserve: Words and deeds," Journal of Macroeconomics, Elsevier, vol. 75(C).

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    More about this item

    Keywords

    central banks; monetary policy committees; federal reserve; fomc.;
    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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