Central Bank Communication or the Media’s Interpretation: What Moves Markets?
The goal of this paper is to investigate what type of information from Bank of Canada communication statements or the market commentary based on these statements has a significant effect on the volatility or level of returns in a short-term interest rate market. Two different text mining methods are used to extract interpretable themes from the document set. Bank FAD press release themes emphasizing the balance of risks, effects on GDP, labour, investment, and the CPI, the terrorist attacks of 2001, and the economic effects of SARS, BSE, blackouts, and other shocks all tended to significantly reduce short-term BAX market volatility. In contrast, discussions of oil prices, the Canadian dollar, the inflation projection and whether the economy is at capacity, and certain forward looking statements significantly increased volatility. Market news stories often offset the effects of the Bank’s communication statements and were much more likely to increase market volatility while the Bank reduced it. Market stories were also more likely to have significant effects the greater the difference from the Bank news they covered but could still be important when largely replicating the original information.
|Date of creation:||2012|
|Date of revision:|
|Contact details of provider:|| Postal: 234 Wellington Street, Ottawa, Ontario, K1A 0G9, Canada|
Phone: 613 782-8845
Fax: 613 782-8874
Web page: http://www.bank-banque-canada.ca/
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- David Lucca & Francesco Trebbi, 2008. "Measuring Central Bank Communication:," 2008 Meeting Papers 571, Society for Economic Dynamics.
- Refet Gürkaynak & Brian P. Sack & Eric T. Swanson, 2004.
"Do actions speak louder than words? the response of asset prices to monetary policy actions and statements,"
Finance and Economics Discussion Series
2004-66, Board of Governors of the Federal Reserve System (U.S.).
- Refet S Gürkaynak & Brian Sack & Eric Swanson, 2005. "Do Actions Speak Louder Than Words? The Response of Asset Prices to Monetary Policy Actions and Statements," International Journal of Central Banking, International Journal of Central Banking, vol. 1(1), May.
- Refet GÃ¼rkaynak & Brian Sack, 2005. "Do Actions Speak Louder Than Words?The Response of Asset Prices to Monetary Policy Actions and Statements," Computing in Economics and Finance 2005 323, Society for Computational Economics.
- Gurkaynak, Refet S & Sack, Brian & Swanson, Eric T, 2005. "Do Actions Speak Louder Than Words? The Response of Asset Prices to Monetary Policy Actions and Statements," MPRA Paper 820, University Library of Munich, Germany.
- Refet Gurkaynak & Brian Sack & Eric Swanson, 2005. "Do Actions Speak Louder than Words? The Response of Asset Prices to Monetary Policy Actions and Statements," Macroeconomics 0504013, EconWPA.
- Ehrmann, Michael & Fratzscher, Marcel, 2005. "Communication and decision-making by central bank committees: different strategies, same effectiveness?," Working Paper Series 0488, European Central Bank.
- Michelle Bligh & Gregory D. Hess, 2006. "A Quantitive Assessment of the Qualitative Aspects of Chairman Greenspan's Communications," Computing in Economics and Finance 2006 213, Society for Computational Economics.
- Bernd Hayo & Matthias Neuenkirch, 2009.
"Domestic or U.S. News: What Drives Canadian Financial Markets?,"
MAGKS Papers on Economics
200908, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
- Bernd Hayo & Matthias Neuenkirch, 2012. "Domestic Or U.S. News: What Drives Canadian Financial Markets?," Economic Inquiry, Western Economic Association International, vol. 50(3), pages 690-706, 07.
- Christine Fay & Toni Gravelle, 2010. "Has the Inclusion of Forward-Looking Statements in Monetary Policy Communications Made the Bank of Canada More Transparent?," Discussion Papers 10-15, Bank of Canada.
- Scott Hendry & Alison Madeley, 2010. "Text Mining and the Information Content of Bank of Canada Communications," Staff Working Papers 10-31, Bank of Canada.
When requesting a correction, please mention this item's handle: RePEc:bca:bocawp:12-9. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.