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Let's face it: Quantifying the impact of nonverbal communication in FOMC press conferences

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  • Curti, Filippo
  • Kazinnik, Sophia

Abstract

When the Fed Chair speaks, investors not only listen, but also watch. To demonstrate this phenomenon, we apply facial recognition analysis to FOMC press conference videos and quantify one of the most important aspects of nonverbal communication - facial expressions. Using minute-level data, we align our nonverbal communication measure with a set of financial assets to estimate the impact of the Fed Chairs’ facial expressions on investor expectations. We find that investors adversely react to negative expressions revealed during the press conference, even when controlling for the verbal component of the press conference and other explanatory variables.

Suggested Citation

  • Curti, Filippo & Kazinnik, Sophia, 2023. "Let's face it: Quantifying the impact of nonverbal communication in FOMC press conferences," Journal of Monetary Economics, Elsevier, vol. 139(C), pages 110-126.
    • Handle: RePEc:eee:moneco:v:139:y:2023:i:c:p:110-126
    DOI: 10.1016/j.jmoneco.2023.06.007
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    More about this item

    Keywords

    Central bank communication; Market expectations; Behavioral finance; Facial recognition; Video data; Machine learning;
    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
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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