What Say They About Their Mandate? A Textual Assessment of Federal Reserve Speeches

91 Pages Posted: 2 Oct 2019

See all articles by Myrthe Dieijen

Myrthe Dieijen

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE)

Robin L. Lumsdaine

American University - Department of Finance and Real Estate; Erasmus University Rotterdam (EUR) - Department of Econometrics; National Bureau of Economic Research (NBER); Tinbergen Institute

Date Written: August 14, 2019

Abstract

This paper considers the extent to which the Federal Reserve has balanced the responsibilities set out by its dual mandate and whether, in the aftermath of the 2007-8 financial crisis, the Federal Reserve effectively adopted a third mandate of ensuring financial stability and mitigating systemic risk. We do this by analyzing officials’ speeches using a variety of text-processing techniques. We find that the price stability emphasis that existed before the crisis gave way to a focus on employment conditions as the crisis unfolded. Additionally, we indeed find an increasing role for financial stability in the post-crisis period.

Keywords: Financial Stability, Dual Mandate, FOMC, Latent Dirichlet Allocation (LDA), Dynamic Topic Model

JEL Classification: E58, E61, C54, C63, E02

Suggested Citation

Dieijen, Myrthe and Lumsdaine, Robin L., What Say They About Their Mandate? A Textual Assessment of Federal Reserve Speeches (August 14, 2019). Available at SSRN: https://ssrn.com/abstract=3455456 or http://dx.doi.org/10.2139/ssrn.3455456

Myrthe Dieijen

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )

P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
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+31104088945 (Phone)

Robin L. Lumsdaine (Contact Author)

American University - Department of Finance and Real Estate ( email )

Kogod School of Business
4400 Massachusetts Ave., N.W.
Washington, DC 20016-8044
United States

Erasmus University Rotterdam (EUR) - Department of Econometrics ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Tinbergen Institute ( email )

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

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