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Discussion Paper Details

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Title: Transparency and Deliberation within the FOMC: a Computational Linguistics Approach

Author(s): Stephen Hansen, Michael McMahon and Andrea Prat

Publication Date: May 2014

Keyword(s): career concerns, deliberation, FOMC, monetary policy and transparency

Programme Area(s): Industrial Organization and International Macroeconomics

Abstract: How does transparency, a key feature of central bank design, affect the deliberation of monetary policymakers? We exploit a natural experiment in the Federal Open Market Committee in 1993 together with computational linguistic models (particularly Latent Dirichlet Allocation) to measure the effect of increased transparency on debate. Commentators have hypothesized both a beneficial discipline effect and a detrimental conformity effect. A difference-in-differences approach inspired by the career concerns literature uncovers evidence for both effects. However, the net effect of increased transparency appears to be a more informative deliberation process.

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Bibliographic Reference

Hansen, S, McMahon, M and Prat, A. 2014. 'Transparency and Deliberation within the FOMC: a Computational Linguistics Approach'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=9994