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Shocking language: Understanding the macroeconomic effects of central bank communication

Hansen, Stephen and McMahon, Michael (2015) Shocking language: Understanding the macroeconomic effects of central bank communication. CFM discussion paper series (CFM-DP2015-37). Centre For Macroeconomics, London, UK.

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Abstract

We explore how the multi-dimensional aspects of information released by the FOMC has effects on both market and real economic variables. Using tools from computational linguistics, we measure the information released by the FOMC on the state of economic conditions, as well as the guidance the FOMC provides about future monetary policy decisions. Employing these measures within a FAVAR framework, we find that shocks to forward guidance are more important than the FOMC communication of current economic conditions in terms of their effects on market and real variables. Nonetheless, neither communication has particularly strong effects on real economic variables.

Item Type: Monograph (Discussion Paper)
Official URL: http://www.centreformacroeconomics.ac.uk/Home.aspx
Additional Information: © 2015 The Authors
Divisions: Centre for Macroeconomics
Subjects: H Social Sciences > HB Economic Theory
JEL classification: E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E52 - Monetary Policy (Targets, Instruments, and Effects)
E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E58 - Central Banks and Their Policies
Sets: Research centres and groups > Centre for Macroeconomics
Date Deposited: 13 Dec 2017 11:06
Last Modified: 10 Sep 2019 23:27
URI: http://eprints.lse.ac.uk/id/eprint/86247

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