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Federal reserve chair communication sentiments’ heterogeneity, personal characteristics, and their impact on target rate discovery

Author

Listed:
  • Juan Arismendi-Zambrano
  • Massimo Guidolin
  • Alessia Paccagnini

Abstract

We construct a communication risk profile of the U.S. Federal Reserve Chair by measuring the sentiment of their public statements during their tenure. Communications’ sentiment impact on the interest rates price discovery process by the market after the FOMC meeting is analyzed. The results show that there is a significant difference in the communications’ sentiment that is heterogeneous on the personal characteristics, controlling for the economic environment, and that the Chair communications’ sentiment plays a role in diminishing the surprise of Federal Reserve announcements.

Suggested Citation

  • Juan Arismendi-Zambrano & Massimo Guidolin & Alessia Paccagnini, 2020. "Federal reserve chair communication sentiments’ heterogeneity, personal characteristics, and their impact on target rate discovery," CAMA Working Papers 2020-105, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  • Handle: RePEc:een:camaaa:2020-105
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    File URL: https://cama.crawford.anu.edu.au/sites/default/files/publication/cama_crawford_anu_edu_au/2020-12/105_2020_arismendi-zambrano_guidolin_paccagnini.pdf
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    More about this item

    Keywords

    Federal Reserve; Monetary Policy; Communications; Federal Funds Rate; Machine Learning;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

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