Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/272874 
Year of Publication: 
2022
Series/Report no.: 
Sveriges Riksbank Working Paper Series No. 417
Publisher: 
Sveriges Riksbank, Stockholm
Abstract: 
When does the Federal Reserve deviate from its dual mandate of pursuing the economic goals of maximum employment and price stability and what are the consequences? We assemble the most comprehensive collection of Federal Reserve speeches to-date and apply state-ofthe-art natural language processing methods to extract a variety of textual features from each paragraph of each speech. We find that the periodic emergence of non-dual mandate related discussions is an important determinant of time-variations in the historical conduct of monetary policy with implications for asset returns. The period from mid-1996 to late2010 stands out as the time with the narrowest focus on balancing the dual mandate. Prior to the 1980s there was a outsized attention to employment and output growth considerations, while non dual-mandate discussions centered around financial stability considerations emerged after the Great Financial Crisis. Forward-looking financial stability concerns are a particularly important driver of a less accommodative monetary policy stance when Fed officials link these concerns to monetary policy, rather than changes in banking regulation. Conversely, discussions about current financial crises and monetary policy in the context of inflation-employment themes are associated with a more accommodative policy stance.
Subjects: 
Natural Language Processing
Machine Learning
Central Bank Communication
Financial Stability
Zero Shot Classification
Extractive Question Answering
Semantic Textual Similarity
JEL: 
C63
D84
E32
E7
Document Type: 
Working Paper

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