Macro/International Workshops
MIEW (Macro/International Economics Workshop) - Andrea Guerrieri D'Amati
Andrea will present a project he has been working on with Gavin Hassall
Title: Embracing the Future: Tense Patterns and Forward-Looking Monetary Policy.
Abstract : This paper explores how the language used in Federal Open Market Committee (FOMC) meeting minutes relates to future monetary policy and impacts financial markets. We construct a measure of future-oriented language using a Structural Topic Model combined with a Large Language Model. Regressing stock market reactions on the share of future-oriented language for each topic shows that increased discussion of GDP and monetary policy in the future tense associates with stock price increases. This suggests forward-looking communication provides valuable signals to investors about central bank intentions. The results demonstrate subtle variations in central bank communications can sway expectations and risk assessments, which highlights the importance of thoughtful transparency practices when conveying policy deliberations to the public.