Related papers: Bounded Rationality in Central Bank Communication
This research article analyzes the language used in the official statements released by the Federal Open Market Committee (FOMC) after its scheduled meetings to gain insights into the impact of FOMC official statements on financial markets…
Communication is now a standard tool in the central bank's monetary policy toolkit. Theoretically, communication provides the central bank an opportunity to guide public expectations, and it has been shown empirically that central bank…
The effectiveness of central bank communication is a crucial aspect of monetary policy transmission. While recent research has examined the influence of policy communication by the chairs of the Federal Reserve on various financial…
This paper introduces a transparent framework to identify the informational content of FOMC announcements. We do so by modelling the expectations of the FOMC and private sector agents using state of the art computational linguistic tools on…
Modern macroeconomic models, particularly those grounded in Rational Expectation Dynamic Stochastic General Equilibrium (DSGE), operate under the assumption of fully rational decision-making. This paper examines the impact of behavioral…
The Federal Open Market Committee within the Federal Reserve System is responsible for managing inflation, maximizing employment, and stabilizing interest rates. Meeting minutes play an important role for market movements because they…
Behavioral finance has become an increasingly important subfield of finance. However the main parts of behavioral finance, prospect theory included, understand financial markets through individual investment behavior. Behavioral finance…
In this study, we analyze documents published by central banks using text mining techniques and propose a method to evaluate the policy tone of central banks. Since the monetary policies of major central banks have a broad impact on…
The bounded confidence model represents a widely adopted framework for modeling opinion dynamics wherein actors have a continuous-valued opinion and interact and approach their positions in the opinion space only if their opinions are…
In this study, we examine the Federal Reserve's communication strategies during the COVID-19 pandemic, comparing them with communication during previous periods of economic stress. Using specialized dictionaries tailored to COVID-19,…
Markets and policymakers around the world hang on the consequential monetary policy decisions made by the Federal Open Market Committee (FOMC). Publicly available textual documentation of their meetings provides insight into members'…
"Fedspeak", the stylized and often nuanced language used by the U.S. Federal Reserve, encodes implicit policy signals and strategic stances. The Federal Open Market Committee strategically employs Fedspeak as a communication tool to shape…
Using FOMC transcripts and customized deep learning models, we quantify ``hidden dissent'', or disagreement in the FOMC that is unobserved in formal votes. We find hidden dissent to be prevalent and systematically driven by macroeconomic…
We present an opinion model founded upon the principles of the bounded confidence interaction among agents. Our objective is to explain the polarization effects inherent to vector-valued opinions. The evolutionary process adheres to the…
Central banks cannot observe market reactions to their communications before release. We propose a framework in which Large Language Models simulate 30 heterogeneous traders interpreting European Central Bank press conference transcripts,…
Forecasting central bank policy decisions remains a persistent challenge for investors, financial institutions, and policymakers due to the wide-reaching impact of monetary actions. In particular, anticipating shifts in the U.S. federal…
Standard economic theory assumes that agents in markets behave rationally. However, the observation of extremely large fluctuations in the price of financial assets that are not correlated to changes in their fundamental value, as well as…
Human decision-making in real-life deviates significantly from the optimal decisions made by fully rational agents, primarily due to computational limitations or psychological biases. While existing studies in behavioral finance have…
We examine the affective content of central bank press statements using emotion analysis. Our focus is on two major international players, the European Central Bank (ECB) and the US Federal Reserve Bank (Fed), covering a time span from 1998…
Public perceptions and expectations of inflation shape household spending, wage bargaining, and policy support, making them key determinants of macroeconomic outcomes. However, current measures rely on infrequent surveys and offer limited…