Disagreement inside the FOMC: New Insights from Tone Analysis

Economic Papers from Trinity College Dublin, Economics Department

Abstract: This paper analyses the drivers of divergence in tone among Federal Open Market Committee (FOMC) members using text analysis tools. We use a financial dictionary to measure the tone of FOMC transcripts at the speaker-meeting-round level. We then relate the tone of FOMC members remarks with their individual projections for inflation and unemployment rate. Our results show a positive relationship between inflation projections and the tone used by FOMC members, suggesting that divergence in tone among members is mainly driven by differences in their projected levels of inflation. We also show that Federal Reserve Bank presidents and voting members are those who use a more distinct tone, in particular during the economics go-round.

Keywords: central banks; monetary policy committees; federal reserve; fomc. (search for similar items in EconPapers)
JEL-codes: E52 E58 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2021-09
New Economics Papers: this item is included in nep-big, nep-cba, nep-mac and nep-mon
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:tcd:tcduee:tep1021

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