Central Bank Mandates: How Differences Can Influence the Content and Tone of Central Bank Communication

Bohl, Martin T.; Kanelis, Dimitrios; Siklos, Pierre L.


Abstract

Using modern text mining methods, we analyze the influence of central bank mandates on the content and tone of communication via speeches. Relatedly, we also examine empirically how inflation and unemployment expectations affect the tone of speeches relative to past macroeconomic developments. We compare speeches given by senior officials of the Federal Reserve (FED) against ones of the European Central Bank (ECB). We find evidence that the mandate of the central bank does affect speech sentiment. That said, speeches by both central banks display greater similarities before the Great Financial Crisis (GFC), than afterwards. We also find that, especially since the GFC, unemployment expectations drive the tone of FED speeches while inflation expectations influence the tone of ECB speeches.

Keywords
Expectations; Inflation; Central Bank Mandates; Speeches; Structural Topic Model; Unemployment



Publication type
Forschungsartikel (Zeitschrift)

Peer reviewed
Yes

Publication status
accepted / in press (not yet published)

Year
2023

Journal
Journal of International Money and Finance

Language
English

ISSN
0261-5606

DOI