Analysis of the Fed's communication by using textual entailment model of Zero-Shot classification

Abstract

In this study, we analyze documents published by central banks using text mining techniques and propose a method to evaluate the policy tone of central banks. Since the monetary policies of major central banks have a broad impact on financial market trends, the pricing of risky assets, and the real economy, market participants are attempting to more accurately capture changes in the outlook for central banks' future monetary policies. Since the published documents are also an important tool for the central bank to communicate with the market, they are meticulously elaborated on grammatical syntax and wording, and investors are urged to read more accurately about the central bank's policy stance. Sentiment analysis on central bank documents has long been carried out, but it has been difficult to interpret the meaning of the documents accurately and to explicitly capture even the intentional change in nuance. This study attempts to evaluate the implication of the zero-shot text classification method for an unknown economic environment using the same model. We compare the tone of the statements, minutes, press conference transcripts of FOMC meetings, and the Fed officials' (chair, vice chair, and Governors) speeches. In addition, the minutes of the FOMC meetings were subjected to a phase analysis of changes in each policy stance since 1971.