{"id":1380,"date":"2024-09-16T12:08:43","date_gmt":"2024-09-16T10:08:43","guid":{"rendered":"https:\/\/www.christophbertsch.com\/?p=1380"},"modified":"2025-02-09T20:09:43","modified_gmt":"2025-02-09T18:09:43","slug":"forthcoming-in-journal-of-econometrics","status":"publish","type":"post","link":"https:\/\/www.christophbertsch.com\/?p=1380","title":{"rendered":"Forthcoming in Journal of Econometrics: \u00a0Central Bank Mandates and Monetary Policy Stances \u00a0"},"content":{"rendered":"\n<p><a rel=\"noreferrer noopener\" href=\"https:\/\/papers.ssrn.com\/sol3\/papers.cfm?abstract_id=4255978\" target=\"_blank\"><strong>&#8220;Central Bank Mandates and Monetary Policy Stances: through the <\/strong><\/a><strong><a href=\"https:\/\/doi.org\/10.1016\/j.jeconom.2025.105948\" target=\"_blank\" rel=\"noreferrer noopener\">Lens<\/a><\/strong><a rel=\"noreferrer noopener\" href=\"https:\/\/papers.ssrn.com\/sol3\/papers.cfm?abstract_id=4255978\" target=\"_blank\"><strong> of Federal Reserve Speeches&#8221;<\/strong><\/a>\u00a0with\u00a0<a rel=\"noreferrer noopener\" href=\"http:\/\/www.isaiahhull.com\" target=\"_blank\">Isaiah Hull,<\/a> <a href=\"https:\/\/www.american.edu\/kogod\/faculty\/lumsdain.cfm\">Robin Lumsdaine<\/a>, and <a rel=\"noreferrer noopener\" href=\"http:\/\/sites.google.com\/site\/zhangxinphd\/\" target=\"_blank\">Xin Zhang<\/a>, <em>Journal of Econometrics, forthcoming.<\/em><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Abstract: The Federal Reserve System has an institutional mandate to pursue price stability and maximum sustainable employment; however, it remains unclear whether it can also pursue secondary objectives. The academic literature has largely argued that it should not. We characterize the Fed\u2019s interpretation of its mandate using state-of-the-art methods from natural language processing, including a collection of large language models (LLMs) that we modify for enhanced performance on central bank texts. We apply these methods and models to a comprehensive corpus of Fed speeches delivered between 1960 and 2022. We find that the Fed perceives financial stability to be the most important policy concern that is not directly enumerated in its mandate, especially in times when the debt-to-GDP ratio is high, but does not generally treat it as a separate policy objective. In its policy discourse, it has frequently discussed the use of monetary policy to achieve financial stability, which we demonstrate generates movements in asset prices, even after rigorously controlling for macroeconomic and financial variables. (C55, E42, E5, E61, G28)<br><\/li>\n<\/ul>\n\n\n\n<figure class=\"wp-block-image alignnone\"><a href=\"https:\/\/www.christophbertsch.com\/wp-content\/uploads\/2024\/09\/fig2b-scaled.jpg\"><img loading=\"lazy\" decoding=\"async\" width=\"300\" height=\"100\" src=\"https:\/\/www.christophbertsch.com\/wp-content\/uploads\/2024\/09\/fig2b-300x100.jpg\" alt=\"\" class=\"wp-image-1372\" srcset=\"https:\/\/www.christophbertsch.com\/wp-content\/uploads\/2024\/09\/fig2b-300x100.jpg 300w, https:\/\/www.christophbertsch.com\/wp-content\/uploads\/2024\/09\/fig2b-1024x341.jpg 1024w, https:\/\/www.christophbertsch.com\/wp-content\/uploads\/2024\/09\/fig2b-768x256.jpg 768w, https:\/\/www.christophbertsch.com\/wp-content\/uploads\/2024\/09\/fig2b-1536x512.jpg 1536w, https:\/\/www.christophbertsch.com\/wp-content\/uploads\/2024\/09\/fig2b-2048x683.jpg 2048w, https:\/\/www.christophbertsch.com\/wp-content\/uploads\/2024\/09\/fig2b-500x167.jpg 500w\" sizes=\"auto, (max-width: 300px) 100vw, 300px\" \/><\/a><figcaption class=\"wp-element-caption\">A word cloud of terms and groups of terms that were identified by extractive question answering as the speaker&#8217;s main concern in Federal Reserve speech paragraphs with low dual mandate content scores over the period 1984-2022.<\/figcaption><\/figure>\n\n\n\n<p>Keywords: Large Language Models, Machine Learning, Central Bank Communication, Financial Stability. An earlier version is available as <em><a href=\"https:\/\/papers.ssrn.com\/sol3\/papers.cfm?abstract_id=4255978\">Riksbank Working Paper No. 417<\/a><\/em><\/p>\n","protected":false},"excerpt":{"rendered":"<p>&#8220;Central Bank Mandates and Monetary Policy Stances: through the Lens of Federal Reserve Speeches&#8221;\u00a0with\u00a0Isaiah Hull, Robin Lumsdaine, and Xin Zhang, Journal of Econometrics, forthcoming. Keywords: Large Language Models, Machine Learning, Central Bank Communication, Financial Stability. An earlier version is available &hellip; <a href=\"https:\/\/www.christophbertsch.com\/?p=1380\">Continue reading <span class=\"meta-nav\">&rarr;<\/span><\/a><\/p>\n","protected":false},"author":4,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6,77,114,85,115,84],"tags":[],"class_list":["post-1380","post","type-post","status-publish","format-standard","hentry","category-academic-research","category-central-bank-communication","category-large-language-models","category-machine-learning","category-monetary-economics","category-nlp"],"_links":{"self":[{"href":"https:\/\/www.christophbertsch.com\/index.php?rest_route=\/wp\/v2\/posts\/1380","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.christophbertsch.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.christophbertsch.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.christophbertsch.com\/index.php?rest_route=\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/www.christophbertsch.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=1380"}],"version-history":[{"count":6,"href":"https:\/\/www.christophbertsch.com\/index.php?rest_route=\/wp\/v2\/posts\/1380\/revisions"}],"predecessor-version":[{"id":1406,"href":"https:\/\/www.christophbertsch.com\/index.php?rest_route=\/wp\/v2\/posts\/1380\/revisions\/1406"}],"wp:attachment":[{"href":"https:\/\/www.christophbertsch.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1380"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.christophbertsch.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1380"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.christophbertsch.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1380"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}