Title: Federal reserve communications sentiment's impact on target rate discovery
Authors: Juan Carlos Arismendi-Zambrano - University College of Dublin (Ireland) [presenting]
Massimo Guidolin - Universita' Commerciale Luigi Bocconi - BAFFI CAREFIN (Italy)
Alessia Paccagnini - University College Dublin (Ireland)
Abstract: The aim is to construct a communication risk profile of the US Federal Reserve Chair by measuring the sentiment of their public statements during their tenure. Statements' sentiment is calculated by a Naive Bayes text categorization method. 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 plays a role in diminishing the volatility of Federal Reserve announcements and that can be effectively used as a tool for a monetary policy shocks.