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Quarterly Journal of Economics Vol. 133 No. 2 2018

Transparency and Deliberation Within the FOMC: A Computational Linguistics Approach*

Stephen Hansen1; Michael McMahon2; Andrea Prat3

1 University of Oxford, Alan Turing Institute, and Centre for Economic Policy Research · 2 University of Oxford, Centre for Economic Policy Research, Centre for Competitive Advantage in the Global Economy, Centre for Macroeconomics, and Centre for Applied Macroeconomic Analysis · 3 Columbia University, Centre for Economic Policy Research

Abstract

How does transparency, a key feature of central bank design, affect monetary policy makers’ deliberations? Theory predicts a positive discipline effect and negative conformity effect. We empirically explore these effects using a natural experiment in the Federal Open Market Committee in 1993 and computational linguistics algorithms. We first find large changes in communication patterns after transparency. We then propose a difference-in-differences approach inspired by the career concerns literature, and find evidence for both effects. Finally, we construct an influence measure that suggests the discipline effect dominates.

DOI
10.1093/qje/qjx045
Volume
133
Issue
2
Pages
801-870
Language
en
Sources
bibtex:phds-export.bib openalex crossref

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