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Threats to central bank independence: High-frequency identification with twitter

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  • Bianchi, Francesco
  • Gómez-Cram, Roberto
  • Kind, Thilo
  • Kung, Howard

Abstract

A high-frequency approach is used to analyze the effects of President Trump’s tweets that criticize the Federal Reserve on financial markets. Identification exploits a short time window around the precise timestamp for each tweet. The average effect on the expected fed funds rate is negative and statistically significant, with the magnitude growing by horizon. The tweets also lead to an increase in stock prices and to a decrease in long-term U.S. Treasury yields. VAR evidence shows that the tweets had an important impact on actual monetary policy, the stock market, bond premia, and the macroeconomy.

Suggested Citation

  • Bianchi, Francesco & Gómez-Cram, Roberto & Kind, Thilo & Kung, Howard, 2023. "Threats to central bank independence: High-frequency identification with twitter," Journal of Monetary Economics, Elsevier, vol. 135(C), pages 37-54.
    • Handle: RePEc:eee:moneco:v:135:y:2023:i:c:p:37-54
    DOI: 10.1016/j.jmoneco.2023.01.001
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    More about this item

    Keywords

    High-frequency identification; Social media; Asset prices; Fed funds rate; Central bank independence;
    All these keywords.

    JEL classification:

    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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