Financial stability and the Fed: Evidence from congressional hearings

Arina Wischnewsky, David-Jan Jansen and Matthias Neuenkirch

Economic Inquiry, 2021, vol. 59, issue 3, 1192-1214

Abstract: This article retraces how financial stability considerations interacted with US monetary policy before and during the Great Recession. Using text‐mining techniques, this article innovates by constructing indicators for financial stability sentiment expressed during testimonies of five Federal Reserve Chairs. Including these text‐based measures adds explanatory power to Taylor‐rule models. Negative financial stability sentiment coincided with a more accommodative monetary policy stance than implied by standard Taylor‐rule factors, even during the decades before the Great Recession. These findings are consistent with a preference for monetary policy reacting to financial instability rather than acting pre‐emptively to a perceived build‐up of risks.

Date: 2021
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https://doi.org/10.1111/ecin.12977

Related works:
Working Paper: Financial Stability and the Fed: Evidence from Congressional Hearings (2020)
Working Paper: Financial stability and the Fed: evidence from congressional hearings (2019)
Working Paper: Financial Stability and the Fed: Evidence fromCongressional Hearings (2019)
Working Paper: Financial Stability and the Fed: Evidence from Congressional Hearings (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:bla:ecinqu:v:59:y:2021:i:3:p:1192-1214

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