We develop a deep learning model to detect emotions embedded in press conferences after the Federal Open Market Committee meetings and examine the influence of the detected emotions on financial markets

The Voice of Monetary Policy. Yuriy Gorodnichenko, Tho Pham, and Oleksandr Talavera. American Economic Review, Feb 2023, Vol. 113, No. 2: Pages 548-584. https://pubs.aeaweb.org/doi/pdfplus/10.1257/aer.20220129

Abstract: We develop a deep learning model to detect emotions embedded in press conferences after the Federal Open Market Committee meetings and examine the influence of the detected emotions on financial markets. We find that, after controlling for the Federal Reserve’s actions and the sentiment in policy texts, a positive tone in the voices of Federal Reserve chairs leads to significant increases in share prices. Other financial variables also respond to vocal cues from the chairs. Hence, how policy messages are communicated can move the financial market. Our results provide implications for improving the effectiveness of central bank communications.

JEL D83, E31, E44, E52, E58, F31, G14