Job Market Paper
The Policy Duet: Coordination in U.S. Monetary-Fiscal Communication, 1911–2025 (draft coming soon)
Abstract: This paper studies the macroeconomic effects of coordination in U.S. monetary and fiscal communication about inflation. I construct a new historical dataset covering speeches, statements, and other policy documents from the Federal Reserve, the Treasury, the White House, and Congress spanning 1911 to 2025, and use sentence-level text classification to measure whether monetary and fiscal authorities convey aligned or divergent inflation signals. I aggregate these signals into a monetary-fiscal communication coordination index, which varies systematically with the business cycle, the political environment, and wartime periods. To identify the effects of coordination, I estimate a structural VAR with an external instrument based on the ideological proximity between FOMC members and the congressional majority. A one-standard-deviation increase in the coordination index, about one-third of the buildup observed during the COVID-19 period, raises real GDP growth by 1.2 percentage points, lowers unemployment, increases hours worked, and raises inflation. Interest rates rise as well, consistent with a Taylor rule type policy response. A reduction in economic policy uncertainty and an improvement in consumer sentiment emerge as potential mechanisms behind these effects. The results indicate that monetary-fiscal communication coordination is not merely a byproduct of macroeconomic conditions, but an independent channel through which policy institutions shape expectations and macroeconomic outcomes.
Working Papers
Louder Than Rates: The Systematic Nature of Central Bank Communication
(with Tiziana Assenza, Fabrice Collard, Philipp Wangner) [CEPR Discussion Paper DP21691]
Abstract: Do central banks decide systematically how much to communicate when explaining their policy decisions? Using all U.S. Federal Open Market Committee policy statements since 1994, we measure communication effort through the change in Shannon entropy and estimate a forward-looking communication rule. We find that communication is systematic: the Federal Reserve communicates more when inflation is expected to exceed target and output is expected to fall below potential. This finding is robust across a variety of sensitivity exercises. We then develop a New Keynesian model with imperfect information showing that systematic communication acts as a second policy instrument, stabilizing expectations and complementing interest-rate policy, especially at the zero lower bound.
The Uncertainty Channel of Monetary Policy Communication
Abstract: This paper studies whether central bank communication causally reduces monetary policy uncertainty and how this channel affects the macroeconomy. I construct a novel monthly measure of Federal Reserve communication using 9,298 speeches delivered by FOMC members between 1951 and 2022 and study its relationship with a newspaper-based index of U.S. monetary policy uncertainty. To address simultaneity between communication and uncertainty, I exploit a regime shift in the volatility of communication associated with the Fed’s transition toward greater transparency in the early 2000s and identify causal effects using identification through heteroskedasticity. An unexpected one-standard-deviation increase in monetary policy communication reduces monetary policy uncertainty by about 0.25 standard deviations. Structural VAR evidence shows that this reduction in uncertainty has sizable and persistent real effects: within two months, industrial production rises by about 0.3 percent and unemployment declines by 0.2 percentage points, while durable goods consumption increases by about 0.5 percent. These findings highlight an uncertainty channel of monetary policy communication and show that transparent communication acts as an independent and powerful policy tool.
Work in Progress
Lost in Translation? The Impact of Fed Statements on Consumers (draft coming soon)
(with Tiziana Assenza, Fabrice Collard)