[Journal:] Swiss Journal of Economics and Statistics [ISSN:] 2235-6282 [Volume:] 143 [Year:] 2007 [Issue:] 2 [Pages:] 155-185
In this analysis, the informational content of central bank rhetoric is assessed based on the experience with the ECB since 1999. We construct a wording indicator reflecting the "hawkishness" of monetary rhetorics. For the construction, we develop an objective algorithm representing a learning process of ECB observers. We then integrate this indicator into a standard Taylor-type ordered probit model for the explanation of the interest rate. We show that the wording indicator can improve the model’s fit when added to the standard explanatory variables. However, a model based solely on this indicator performs worse than the baseline.