The communication reaction function of the European Central Bank. An analysis using topic modelling

Autor: Luca Alfieri, Diana Gabrielyan
Jazyk: angličtina
Rok vydání: 2024
Předmět:
Zdroj: Baltic Journal of Economics, Vol 24, Iss 1, Pp 58-87 (2024)
Druh dokumentu: article
ISSN: 1406099X
2334-4385
1406-099X
DOI: 10.1080/1406099X.2024.2303904
Popis: Central bank communication plays a crucial role in the conduct of monetary policy, yet the research on central bank communication, while growing, is still scarce. In this paper, we analyze the communication reaction function of the European Central Bank (ECB) through topic-based indices derived from the bank’s speeches. These indices are used as dependent variables in policy and communication reaction function models, as suggested by recent literature. The topics are extracted using Latent Dirichlet Allocation (LDA), a popular text mining algorithm for topic extraction. The ECB has recently reviewed its monetary policy strategy, which led to an increase in studies incorporating the new methods offered by text mining for analyzing the policy reaction function of the bank. We show how indices built through topic modelling can be used to study the communication reaction function of a central bank, and we examine which variables are significant for every topic communicated by the ECB.
Databáze: Directory of Open Access Journals
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