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Artificial Intelligence and Central Bank Communication: The Case of the ECB

Author

Listed:
  • Nicolas Fanta

    (Institute of Economic Studies, Charles University, Prague)

  • Roman Horvath

    (Institute of Economic Studies, Charles University, Prague)

Abstract

We examine whether artificial intelligence (AI) can decipher European Central Bank´s communication. Employing 1769 inter-meeting verbal communication events of the European Central Bank´s Governing Council members, we construct an AI-based indicator evaluating whether communication is leaning towards easing, tightening or maintaining the monetary policy stance. We find that our AI-based indicator replicates well similar indicators based on human expert judgment but at much higher speed and at much lower costs. Using our AI-based indicator and a number of robustness checks, our regression results show that ECB communication matters for the future monetary policy even after controlling for financial market expectations and lagged monetary policy decisions.

Suggested Citation

  • Nicolas Fanta & Roman Horvath, 2023. "Artificial Intelligence and Central Bank Communication: The Case of the ECB," Working Papers IES 2023/29, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Sep 2023.
    • Handle: RePEc:fau:wpaper:wp2023_29
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    File URL: https://ies.fsv.cuni.cz/en/veda-vyzkum/working-papers/2023-29
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    More about this item

    Keywords

    Artificial intelligence; central bank communication; monetary policy;
    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

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