Related papers: Bounded Rationality in Central Bank Communication

Following a Geometrical Brownian Motion extension into an Irrational Fractional Brownian Motion model, we re-examine agent behaviour reacting to time dependent news on the log-returns thereby modifying a financial market evolution. We…

I propose an approach to quantify attention to inflation in the data and show that the decrease in the volatility and persistence of U.S. inflation after the Great Inflation period was accompanied by a decline in the public's attention to…

Accurately forecasting central bank policy decisions, particularly those of the Federal Open Market Committee(FOMC) has become increasingly important amid heightened economic uncertainty. While prior studies have used monetary policy texts…

We study the informational efficiency of a market with a single traded asset. The price initially differs from the fundamental value, about which the agents have noisy private information (which is, on average, correct). A fraction of…

The notion that an independent central bank reduces a country's inflation is a controversial hypothesis. To date, it has not been possible to satisfactorily answer this question because the complex macroeconomic structure that gives rise to…

We develop a theoretical framework for understanding how cognitive load affects information processing in financial markets and test it using exogenous variation in disclosure complexity. Our model distinguishes between attention allocation…

Following the financial crisis of the late 2000s, policy makers have shown considerable interest in monitoring financial stability. Several central banks now publish indices of financial stress, which are essentially based upon market…

In the present paper a model of a market consisting of real and financial interacting sectors is studied. Agents populating the stock market are assumed to be not able to observe the true underlying fundamental, and their beliefs are biased…

This paper presents a novel approach to analyze human decision-making that involves comparing the behavior of professional chess players relative to a computational benchmark of cognitively bounded rationality. This benchmark is constructed…

In this era of fast and large-scale opinion formation, a mathematical understanding of opinion evolution, a.k.a. opinion dynamics, is especially important. Linear graph-based dynamics and bounded confidence dynamics are the two most popular…

Rational respondents to economic surveys may report as a point forecast any measure of the central tendency of their (possibly latent) predictive distribution, for example the mean, median, mode, or any convex combination thereof. We…

The U.S. Federal Open Market Committee (FOMC) regularly discusses and sets monetary policy, affecting the borrowing and spending decisions of millions of people. In this work, we release Op-Fed, a dataset of 1044 human-annotated sentences…

In this era of fast and large-scale opinion formation, a mathematical understanding of opinion evolution, a.k.a. opinion dynamics, acquires importance. Linear graph-based dynamics and bounded confidence dynamics are the two popular models…

We investigate the effectiveness of large language models (LLMs), including reasoning-based and non-reasoning models, in performing zero-shot financial sentiment analysis. Using the Financial PhraseBank dataset annotated by domain experts,…

How could a product or service is reasonably evaluated by anyone in the shortest time? A million dollar question but it is having a simple answer: Sentiment analysis. Sentiment analysis is consumers review on products and services which…

People's opinions on a wide range of topics often evolve over time through their interactions with others. Models of opinion dynamics primarily focus on one-dimensional opinions, which represent opinions on one topic. However, opinions on…

The Federal Reserve System (the Fed) plays a significant role in affecting monetary policy and financial conditions worldwide. Although it is important to analyse the Fed's communications to extract useful information, it is generally…

The thesis of this essay is that, in heterogeneous agent macroeconomics, the assumption of rational expectations about equilibrium prices is unrealistic and should be replaced. Rational expectations imply that decision makers forecast…

Emotional coordination is a core property of human interaction that shapes how relational meaning is constructed in real time. While text-based affect inference has become increasingly feasible, prior approaches often treat sentiment as a…

News media coverage of monetary policy is not a passive transcript of central-bank communication: it filters announcements, macroeconomic news, and editorial choices into narratives that move expectations and policy decisions. We embed…