Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/273879 
Year of Publication: 
2022
Series/Report no.: 
MAGKS Joint Discussion Paper Series in Economics No. 41-2022
Publisher: 
Philipps-University Marburg, School of Business and Economics, Marburg
Abstract: 
To which degree can variation in sentiment-based indicators of central bank communication be attributed to changes in macroeconomic, financial, and monetary variables; idiosyncratic speaker effects; sentiment persistence; and random "noise" ? Using the Loughran and McDonald (2011) dictionary on a text corpus containing more than 10,000 speeches and press statements, we construct sentiment-based indicators for the ECB and the Fed. An analysis of variance (ANOVA) shows that sentiment is strongly persistent and influenced by speaker-specific effects. With about 80% of the variation in sentiment being due to noise, our findings cast doubt on the reliability of conclusions based on variation in dictionary-based indicators.
Subjects: 
Sentiment index
monetary policy
central banks
Loughran and McDonald (2011) dictionary
information content of sentiment indices
JEL: 
C55
E58
E61
Z13
Document Type: 
Working Paper

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