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An affine term structure model with Fed chairs’ speeches

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  • Ko, Eunmi

Abstract

I analyze the impact of the sentiment expressed in speeches by Fed chairs on Treasury bond yields, using an affine term structure model. The speeches by Fed chairs are numerically evaluated to generate three sentiment factors: negative, neutral, and positive. The variance decomposition analysis indicates that sentiment factors account for a considerable portion of the variance in yield forecasts.

Suggested Citation

  • Ko, Eunmi, 2024. "An affine term structure model with Fed chairs’ speeches," Finance Research Letters, Elsevier, vol. 63(C).
    • Handle: RePEc:eee:finlet:v:63:y:2024:i:c:s1544612324003660
    DOI: 10.1016/j.frl.2024.105336
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    References listed on IDEAS

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    1. Eric Fischer & Rebecca McCaughrin & Saketh Prazad & Mark Vandergon, 2023. "Fed Transparency and Policy Expectation Errors: A Text Analysis Approach," Staff Reports 1081, Federal Reserve Bank of New York.
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    6. Eunmi Ko, 2023. "Optimal Central Bank Forward Guidance," International Journal of Central Banking, International Journal of Central Banking, vol. 19(4), pages 401-447, October.
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    Cited by:

    1. Cho, Dooyeon & Jung, Jaehun, 2026. "Mind the tone: Responses of inflation expectations to central bankers’ speeches," Journal of International Money and Finance, Elsevier, vol. 160(C).
    2. Luu, Thu Thanh & Tran, Minh Quang, 2025. "When the FED speaks their tone, do international financial markets respond?," Finance Research Letters, Elsevier, vol. 86(PB).
    3. Goldstein, Nathan, 2025. "The attention of the Fed," Finance Research Letters, Elsevier, vol. 82(C).
    4. Ko, Eunmi & Dmonte, Alphaeus & Zampieri, Marcos, 2025. "Comparison of an affine term structure model with Fed chair speeches in large language models," Finance Research Letters, Elsevier, vol. 78(C).

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    More about this item

    Keywords

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    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E71 - Macroeconomics and Monetary Economics - - Macro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on the Macro Economy

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