Empirical Assessment of the Impact of Monetary Policy Communication on the Financial Market


This paper proposes an empirical framework to explore the role of monetary policy communication. We develop an econometric methodology to impose restrictions for the identification of communication effects distinct from the effects of policy decisions. The empirical results support the hypothesis that both policy decision and communication factors are required to adequately capture the financial market reactions to monetary policy news. By applying a text mining approach focused on phrases that appear in press conferences on policy meeting days, we find that the communication factors identified are characterized by the policy intentions and preferences of the central bank.


Monetary policy communication, Policy surprise, Financial market, Event study, Text mining

JEL Classification

E52, E58, C30


Research Institute for Economics and Business Administration,
Kobe University
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