Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/265214 
Year of Publication: 
2022
Series/Report no.: 
Bank of Canada Staff Working Paper No. 2022-20
Publisher: 
Bank of Canada, Ottawa
Abstract: 
We measure soft information contained in the congressional testimonies of U.S. Federal Reserve Chairs and analyze its effect on financial markets. Our measures of Fed Chairs' emotions expressed in words, voice and facial expressions are created using machine learning. Increases in the Chair's text-, voice-, or face-emotion indices during these testimonies generally raise the S&P500 index and lower the VIX-indicating that these cues help shape market responses to Fed communications. These effects add up and propagate after the testimony, reaching magnitudes comparable to those after a policy rate cut. Markets respond most to the Chair's emotions expressed about issues related to monetary policy.
Subjects: 
Central bank research
Financial markets
Monetary policy communications
JEL: 
E52
E58
E7
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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