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FOMC Responses to Calls for Transparency

Author

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  • Miguel Acosta
Abstract
I apply latent semantic analysis to Federal Open Market Committee (FOMC) transcripts and minutes from 1976 to 2008 in order to analyze the Fed's responses to calls for transparency. Using a newly constructed measure of the transparency of deliberations, I study two events that define markedly different periods of transparency over this 32-year period. First, the 1978 Humphrey-Hawkins Act increased the degree to which the FOMC used meeting minutes to convey the content of its meetings. Historical evidence suggests that this increased transparency reflected a response to the Act's requirement that the Fed provide greater detail in reporting with respect to its goals and objectives. Second, the 1993 decision to publish nearly verbatim transcripts also increased transparency. However, the cost was an increasing degree of conformity at each meeting, as evidenced by lower variance in content disagreement at the member level.

Suggested Citation

  • Miguel Acosta, 2015. "FOMC Responses to Calls for Transparency," Finance and Economics Discussion Series 2015-60, Board of Governors of the Federal Reserve System (U.S.).
    • Handle: RePEc:fip:fedgfe:2015-60
    DOI: 10.17016/FEDS.2015.060
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    Cited by:

    1. Paul Hubert & Fabien Labondance, 2016. "Central Bank Sentiment and Policy Expectations," SciencePo Working papers Main hal-03459227, HAL.
    2. repec:hal:spmain:info:hdl:2441/7mota32nad8aopst8f7d5aebpo is not listed on IDEAS
    3. repec:spo:wpmain:info:hdl:2441/64veevce0i99oav223j3pkv1hf is not listed on IDEAS
    4. repec:hal:spmain:info:hdl:2441/64veevce0i99oav223j3pkv1hf is not listed on IDEAS
    5. Ashima Goyal & Prashant Parab, 2021. "Qualitative and quantitative Central Bank communications and professional forecasts: Evidence from India," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2021-014, Indira Gandhi Institute of Development Research, Mumbai, India.
    6. Hubert, Paul & Labondance, Fabien, 2021. "The signaling effects of central bank tone," European Economic Review, Elsevier, vol. 133(C).
    7. repec:hal:spmain:info:hdl:2441/4evh7bju58uep3gd1frcn5nr9 is not listed on IDEAS
    8. repec:spo:wpmain:info:hdl:2441/7mota32nad8aopst8f7d5aebpo is not listed on IDEAS
    9. Kawamura, Kohei & Kobashi, Yohei & Shizume, Masato & Ueda, Kozo, 2019. "Strategic central bank communication: Discourse analysis of the Bank of Japan’s Monthly Report," Journal of Economic Dynamics and Control, Elsevier, vol. 100(C), pages 230-250.
    10. Beaupain, Renaud & Girard, Alexandre, 2020. "The value of understanding central bank communication," Economic Modelling, Elsevier, vol. 85(C), pages 154-165.
    11. David Bholat & Stephen Hans & Pedro Santos & Cheryl Schonhardt-Bailey, 2015. "Text mining for central banks," Handbooks, Centre for Central Banking Studies, Bank of England, number 33, April.
    12. Dossani, Asad, 2021. "Central bank tone and currency risk premia," Journal of International Money and Finance, Elsevier, vol. 117(C).
    13. Paul Hubert & Fabien Labondance, 2019. "Central bank tone and the dispersion of views within monetary policy committees," Working Papers hal-03403256, HAL.
    14. Stephen Hansen & Michael McMahon, 2016. "Shocking Language: Understanding the Macroeconomic Effects of Central Bank Communication," NBER Chapters, in: NBER International Seminar on Macroeconomics 2015, National Bureau of Economic Research, Inc.
    15. Sandra A. Cannon, 2015. "Sentiment of the FOMC: Unscripted," Economic Review, Federal Reserve Bank of Kansas City, issue Q IV, pages 5-31.
    16. repec:spo:wpmain:info:hdl:2441/4evh7bju58uep3gd1frcn5nr9 is not listed on IDEAS
    17. Husted, Lucas & Rogers, John & Sun, Bo, 2020. "Monetary policy uncertainty," Journal of Monetary Economics, Elsevier, vol. 115(C), pages 20-36.
    18. Donato Masciandaro & Davide Romelli & Gaia Rubera, 2021. "Monetary policy and financial markets: evidence from Twitter traffic," BAFFI CAREFIN Working Papers 21160, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.
    19. Alessandro RIBONI & Francisco RUGE-MURCIA, 2018. "Deliberation in Committees : Theory and Evidence from the FOMC," Cahiers de recherche 01-2018, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
    20. Hüpper, Florian & Kempa, Bernd, 2023. "Inflation targeting and inflation communication of the Federal Reserve: Words and deeds," Journal of Macroeconomics, Elsevier, vol. 75(C).

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    More about this item

    Keywords

    Federal Open Market Committee; transparency; latent semantic analysis; deliberation; natural language processing; conformity; central banks;
    All these keywords.

    JEL classification:

    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • H83 - Public Economics - - Miscellaneous Issues - - - Public Administration

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