“Spread the Word: International Spillovers from Central Bank Communication” with Hanna Armelius, Isaiah Hull and Xin Zhang (all at Sveriges Riksbank)
(First version: 09/2018; Sveriges Riksbank Working Paper No. 357)
We construct a novel text dataset to measure the sentiment component of communications for 23 central banks over the 2002-2017 period. Our analysis yields three results. First, comovement in sentiment across central banks is not reducible to trade or financial flow exposures. Second, sentiment shocks generate cross-country spillovers in sentiment, policy rates, and macroeconomic variables; and the Fed appears to be a uniquely influential generator of such spillovers, even among prominent central banks. And third, geographic distance is a robust and economically significant determinant of comovement in central bank sentiment, while shared language and colonial ties have weaker predictive power. (JEL E52, E58, F42)
- Keywords: communication, monetary policy, international policy transmission.