Template-type: ReDIF-Paper 1.0
Author-Name: Donato Masciandaro
Author-Name: Davide Romelli
Author-Name: Gaia Rubera
Title: Monetary policy and financial markets: evidence from Twitter traffic
Abstract: The monetary policy announcements of three major central banks: the European Central Bank, the US Federal Reserve and the Bank of England trigger significant discussions about monetary policy on Twitter. Using machine learning techniques we identify Twitter messages related to monetary policy around the release of policy decisions and build an hourly measure of similarity between tweets on monetary policy and the transcripts of announcements. We show that large changes in the similarity between tweets and central bank communication around the time of the announcement correspond to spikes in stock market volatility and jumps in sovereign yields. These findings suggest that social media discussions on central bank communication are a good proxy for monetary policy surprises.
Classification-JEL: E44, E52, E58, G14, G15, G41
Keywords: monetary policy, central bank communication, financial markets, social media, Twitter, US Federal Reserve, European Central Bank, Bank of England
Length: 40
Number: 21160
Creation-Date: 2021
File-URL: https://repec.unibocconi.it/baffic/baf/papers/cbafwp21160.pdf
File-Format: application/pdf
File-Size: 426
Handle: RePEc:baf:cbafwp:cbafwp21160