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A Quantitive Assessment of the Qualitative Aspects of Chairman Greenspan's Communications


Author Info

  • Michelle Bligh

    (Claremont Graduate University)

  • Gregory D. Hess

    (Claremont McKenna College)


A manifestation of the Federal Reserve Board's increased transparency has been Chairman Greenspan's method of communication. The purpose of this paper is to establish the positive aspects of his speeches, testimonies and FOMC statements on financial market variables. This analysis is undertaken using daily data since the middle of 1999, that is the period after which the FOMC provided statements after every FOMC meeting. Using content analysis, we calculate for each communication a measure of its certainty, pessimism, optimism, activity, immediacy and jargon. We then include these variables in standard regression to see if these language variables can help to forecast movements in financial market variables. We find that Chairman Greenspan's language does indeed forecast movements in financial market variables at the same day and 10 day horizons. In particular, FOMC statements contribute substantially to help predict same day and 10 day variation in these measures, though testimonies also contribute to predicting movements at the 10 day horizon. We conclude by arguing that given the given our evidence that Chairman's language predicts movements in the federal funds futures rates and Treasury forward rates, that this is consistent with the beneficial goals from enhanced central bank communications

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Bibliographic Info

Paper provided by Society for Computational Economics in its series Computing in Economics and Finance 2006 with number 213.

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Date of creation: 04 Jul 2006
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Handle: RePEc:sce:scecfa:213

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Keywords: monetary policy; communication;

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Cited by:
  1. Scott Hendry & Alison Madeley, 2010. "Text Mining and the Information Content of Bank of Canada Communications," Working Papers 10-31, Bank of Canada.
  2. Sazedj, Sharmin & Tavares, José, 2011. "Hope, Change, and Financial Markets: Can Obama's Words Drive the Market?," CEPR Discussion Papers 8713, C.E.P.R. Discussion Papers.
  3. Scott Hendry, 2012. "Central Bank Communication or the Media’s Interpretation: What Moves Markets?," Working Papers 12-9, Bank of Canada.
  4. Angela K. Davis & Jeremy M. Piger & Lisa M. Sedor, 2006. "Beyond the numbers: an analysis of optimistic and pessimistic language in earnings press releases," Working Papers 2006-005, Federal Reserve Bank of St. Louis.


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