As the amount of information available on the internet has increased sharply in the last years, methods for measuring and comparing text-based information is gaining popularity on financial markets. Text mining and natural language processing has become an important tool for classifying large collections of texts or documents. One field of applications is topic modelling of the minutes from central banks' monetary policy meetings, which tend to be about topics such as"inflation", "economic growth" and "rates". The central bank of Sweden is the Riksbank, which hold 6 annual monetary policy meetings where the members of the Executive Board decide on the new repo rate. Two weeks later, the minutes of the meeting is published and information regarding the future monetary policy is given to the market in the form of text. This information has before release been unknown to the market, thus having the potential to be market-sensitive. Using Latent Dirichlet Allocation (LDA), an algorithm used for uncovering latent topics in documents, the topics in the meeting minutes should be possible to identify and quantify. In this project, 8 topics were found regarding, among other, inflation, rates, household debt and economic development. An important factor in analysis of central bank communication is the underlying tone in the discussions. It is common to classify central bankers as hawkish or dovish. Hawkish members of the board tend to favour tightening monetary policy and rate hikes, while more dovish members advocate a more expansive monetary policy and rate cuts. Thus, analysing the tone of the minutes can give an indication of future moves of the monetary policy rate. The purpose of this project is to provide a fast method for analysing the minutes from the Riksbank monetary policy meetings. The project is divided into two parts. First, a LDA model was trained to identify the topics in the minutes, which was then used to compare the content of two consecutive meeting minutes. Next, the sentiment was measured as a degree of hawkishness or dovishness. This was done by categorising each sentence in terms of their content, and then counting words with hawkish or dovish sentiment. The resulting net score gives larger values to more hawkish minutes and was shown to follow the repo rate path well. At the time of the release of the minutes, the new repo rate is already known, but the net score does gives an indication of the stance of the board.

Thesis (PhD)--Stellenbosch University, 2011. / ENGLISH ABSTRACT: The effectiveness of monetary policy depends importantly on the expectations of the private sector, as it is largely through this channel of the transmission mechanism that policy changes are transmitted to long-term interest rates. This has increased the emphasis on the role of central bank communication as a monetary policy tool. Successful communication is essential both to enhance the effectiveness of monetary policy and to build support for the institutional framework within which monetary policy is implemented. While the large and growing literature on central bank communication over the past decade has delivered strong support for the important role of central bank communication, there is less agreement about what the optimal communication strategy is. Furthermore, research has been limited mainly to studies of communication between central banks and the financial markets. In an evaluation of progress in the literature, Blinder et al. (2008) highlight the need to examine the interaction between central banks and the rest of the private sector (the general public) as well. The objective of this PhD dissertation is to evaluate the South African Reserve Bank’s (SARB’s) use of communication as a monetary policy tool. Special focus is given to communication with the inattentive general public, who set prices in the labour market and the market for goods and services. Different aspects of the SARB’s communication were studied, including the consistency of the South African Reserve Bank’s communication, the transmission of this communication via the media to the general public, and the process by which the general public gathers and processes the information on inflation. An evaluation of the SARB’s communications (its original messages) provided some evidence that the SARB has succeeded in communicating consistently over the inflation targeting period. This was followed by an assessment of the role of the media in transmitting the original communications to the general public. The results suggest that South African media reports generally show a lack of critical assessment of monetary policy decisions and that the inter-meeting communication by the SARB is ineffective at influencing these. An important challenge is for the SARB to consider how it can participate more actively in the economic discussion at this level and how it can build productive strategic relationships with the media. The final section of this dissertation explores the process by which the general public forms its inflation expectations, relying on epidemiological models to describe the spread of inflation information and to estimate the speed at which the general public, in aggregate, updates their inflation expectations. This estimate of the speed of adjustment will be valuable to future research that aims to build a Phillips curve in a new way for South Africa. A well-modelled Phillips curve will both improve the monitoring of the impact of monetary policy and inform future policy design and implementation. / AFRIKAANSE OPSOMMING: Die doeltreffendheid van die monetêre beleid is beduidend afhanklik van die verwagtinge in die privaat sektor, aangesien beleid hoofsaaklik deur hierdie kanaal langtermyn rentekoerse beïnvloed. Hierdie bewustheid het die klem op die rol van sentrale bank kommunikasie as ‘n monetêre instrument versterk. Suksesvolle kommunikasie is noodsaaklik om beide die effektiwiteit van monetêre beleid te verseker sowel as om ondersteuning vir die institusionele raamwerk waarbinne die monetêre beleid geïmplimenteer word, te bou. Hoewel daar ‘n groot en groeiende literatuur is wat die belangrikheid van sentrale bank kommunikasie oor die afgelope dekade beklemtoon, is daar nie eenstemmigheid oor wat die optimale kommunikasie strategie behels nie. Daarbenewens is meeste studies beperk tot die kommunikasie tussen monetêre owerhede en die finansiële sektor. In ‘n evaluering van die literatuur het Blinder et al. (2008) die noodsaaklikheid beklemtoon om die wisselwerking tussen monetêre owerhede en die res van die privaat sektor (die publiek) te bestudeer. Die doel van hierdie proefskrif is om die Suid-Afrikaanse Reserwebank (SARB) se gebruik van hierdie kommunikasie instrument te evalueer. Spesiale aandag word geskenk aan kommunikasie met die onoplettende publiek wat pryse bepaal in die arbeidsmark en markte vir goedere en dienste. Verskillende aspekte van die SARB se kommunikasie strategie word bestudeer, insluitende die konsekwentheid van kommunikasie, die oordrag van hierdie kommunikasie via die media aan die publiek, asook die proses waarmee die publiek informasie rakende inflasie versamel en verwerk. ‘n Evaluering van die SARB se kommunikasie (die oorspronklike boodskappe) lewer bewys dat die SARB daarin geslaag het om konsekwent te kommunikeer tydens die inflasie teikeningsperiode. Dit word gevolg deur ‘n evaluering van die rol van die media om oorspronklike informasie suskesvol aan die publiek oor te dra. Die resultate dui daarop dat berigte in die Suid Afrikaanse media oor die algemeen aan kritiese evaluering van die monet.re beleidsbesluite ontbreek en die SARB se kommunikasie tussen monetêre beleidsvergaderings is ook oneffektief gevind. ‘n Belangrike uitdaging vir die SARB is dus om te bepaal hoe dit op hierdie vlak tot die ekonomiese debat kan toetree en hoe dit produktiewe strategiese verhoudings met die media kan bou. Die laaste afdeling van die proefskrif bestudeer die proses waarvolgens die publiek hul inflasieverwagtinge formuleer deur gebruik te maak van epidemiologiese modelle wat die verspreiding van inflasie verwagtinge, asook die spoed waarteen die publiek oor die algemeen hul inflasieverwagtinge opdateer, beskryf. Die snelheid waarmee die publiek hul verwagtinge opdateer behoort veral van waarde te wees vir toekomstige studies wat poog om ‘n Phillips kurwe met ‘n nuwe aanslag vir Suid Afrika te skort. ‘n Goed geformuleerde Phillips kurwe sal monitering van monetêre beleide se impak verbeter, en sal ook as ‘n goeie riglyn vir toekomstige beleidsontwerp en -implimentering dien.

This thesis analyzes the effect of the Czech National Bank's (CNB) communica- tion on the interest rate volatility (PRJBOR reference rate). Starting with the literature survey about the central bank communication in the world, I focus on the literature that concerns the CNB. To model the CNB's communication, I use the GARCH(l,1), EGARCH(l,1) and TARCH(l,1) models. I have created a unique data set containing the dummy variables for the CNB communication. The results are as follows: (a) the CNB's communication tends to decrease the volatility, (b) timing of the communication has a key role as the comments closer to the meeting have bigger calming effect, and that (c) there is no clear effect concerning the comments of the Bank Board members in the media. JEL Classification Keywords E43, E44, E52, E58 Czech National Bank, monetary policy signaling, central bank communication, the term structure of interest rates, GARCH analysis Author's email karasp@email.cz Supervisors's email roman. horvath@gmail.com

Après Septembre 2008, du fait du gel du marché interbancaire, d’un manque de liquidité, d’une perte de confiance et des difficultés des institutions financières, la transmission de la politique monétaire au sein de la zone euro a été sévèrement altérée. La Banque Centrale Européenne (BCE) a donc dû avoir recours à des politiques monétaires non-conventionnelles. En considérant, au sein de la zone euro, les contraintes imposées à la banque centrale et la fragmentation des marchés financiers, l’objectif de cette thèse empirique est d’évaluer les canaux de transmission des politiques monétaires conventionnelles et non-conventionnelles de la BCE. Les comportements de prêts des banques étant liés à leurs coûts de financement, le premier essai se focalise sur le canal de transmission des prêts bancaires. Il étudie l’évolution des activités de prêts syndiqués d’institutions financières européennes et leur réaction aux politiques de la BCE. La communication de la banque centrale revêt une importance toute particulière dans une union monétaire. Les deuxième et troisième essais se concentrent sur le canal des signaux. Le deuxième essai étudie sur la communication durant les conférences de presse mensuelles ainsi que ses effets sur la prévisibilité des décisions de politique monétaire et sur les rendements et la volatilité des marchés financiers. Le dernier essai se focalise sur l’utilisation du guidage des taux d’intérêt futurs, une communication non-conventionnelle informant les marchés du niveau futur des taux d’intérêt de court-terme. Il étudie l’efficacité de cette annonce et sa capacité à influencer les prévisions de taux d’intérêt faites par les acteurs de marché. / After September 2008, due to a frozen interbank market, shortage of liquidity, loss of confidence, and collapsing financial institutions, the monetary policy transmission in the euro area was severely impaired. Under thus exceptional circumstances, the European Central Bank (ECB) had to turn to non-standard monetary policy measures. Considering, in the euro area, the constrained range of actions and fragmented financial markets, the objective of this empirical thesis is to assess the transmission channels of ECB standard and non-standard monetary policies and their effects on both financial markets and the economy.As banks’ lending behaviors are related to their financing costs, the first essay focuses on bank lending channel. It studies the evolution of lending activities of European financial institutions on the syndicated loan market and its reaction to the ECB standard and non-standard policies. The communication of the central bank is of utmost importance in a monetary union with heterogeneous, in terms of economic situations and cultures, countries. The second and third essays study the signaling channel of monetary policy. The second essay focuses on the communication during monthly press conferences and their effects on the predictability of monetary policy decisions and on financial markets returns and volatility. The last essay concentrates exclusively on the use of \textit{forward guidance} on interest rate, a non-standard central bank communication providing information on future short-term interest rates. It discusses its effectiveness and ability to lower market participants expected interest rates.

[pt] Como (1) aponta, a previsibilidade acerca da política monetária pode melhorar a eficácia da política de estabilização de um Banco Central. Nesse artigo, procuramos reduzir a incerteza a respeito de um instrumento de Forward Guidance do Banco Central norte-americano (o Federal Reserve) estimando distribuições de probabilidade completas sobre todas as associações possíveis entre seus membros e o dot plot de taxa de juros para cada reunião. Nossa contribuição para a literatura ocorre em duas frentes: primeiro, propomos um algoritmo Bayesiano geral que estima essas hipóteses de associação entre agentes e ações sempre que elas não são observadas. Além disso, elaboramos uma maneira nova e menos subjetiva para quantificar textos em dados numéricos, usando Alocação Latente Dirichlet (LDA) e modelos econométricos de seleção. Esse método apresenta algumas características desejáveis como uma correlação positiva entre o presidente do FOMC e o resto do comitê, e um ordenamento na postura de política monetária que reflete, ainda que parcialmente, visões de analistas de mercado a respeito desse espectro entre membros mais duros e mais lenientes com a taxa de juros. Nosso algoritmo de rastreamento de alvos também tem bom desempenho num ambiente simulado, no sentido em que, em média, considera como mais provável a verdadeira associação entre membros e dots. Usando dados reais de discursos individuais e dots, ele também consegue atribuir a maior probabilidade para a associação correta na única reunião em que ela é conhecida de fato. / [en] As (1) points out, monetary policy predictability can enhance a Central Bank stabilization policy efficacy. In this paper we aim to reduce uncertainty about one Federal Reserve forward guidance instrument by estimating full association probabilities distributions between members and the interest rate dot plot for each FOMC meeting. Our contribution to the literature is twofold: first, we propose a general Bayesian algorithm which estimates these association hypotheses between agents and actions whenever they are not observed. Second, we elaborate a novel and less subjective technique for quantifying text into data, using Latent Dirichlet Allocation (LDA) and shrinkage econometric tools. This method shows some desirable features such as positive correlation between the FOMC chair and the rest of the committee, and a policy stance ordering which partially reflects analysts and market participants views on this hawk-dove spectrum. Our tracking algorithm performs successfully in a simulated environment, in a sense that it on average considers the correct member-to-dot association as the most likely one. Using real data on speeches and Fed dots, it is also able to attribute the highest probability to the correct assignment hypothesis in the only meeting it is known for sure.