Publications

with Filippo Curti, Journal of Monetary Economics, Vol. 139

We apply facial recognition analysis to FOMC press conference videos and quantify one of the most important aspects of nonverbal communication - facial expressions. Using minute-level data, we align our nonverbal communication measure with a set of financial assets to estimate the impact of the Fed Chairs' facial expressions on investor expectations. We find that investors adversely react to negative expressions revealed during the press conference, even when controlling for the verbal component of the press conference and additional explanatory variables. This work sets forth a new way of capturing soft information embedded in central bank communication. 

Keywords: Central Bank Communication, Facial Recognition, Video Data, Market Expectations

with Filippo Curti, Journal of Economic Behavior and Organization , Vol. 212

This paper investigates the characteristics of central bank websites across a large sample of central banks. We systematically derive and quantify these characteristics across three dimensions: text, visual presentation, and website performance. We then conduct a survey to isolate the main determinants of user experience. We find that websites with higher visual complexity and lower visual contrast are perceived as more clear and credible. We build a set of time series metrics based on historical website data to capture the evolution of central bank websites with respect to clarity, attractiveness, ease of navigation, and credibility. 

Keywords: Central Bank Communication, Transparency, Credibility, Alternative Data, Visual Data, User Experience, Surveys

with Filippo Curti, Jeffrey Gerlach, Michael Lee, Atanas Mihov; Journal of Operational Risk, Vol. 18, No. 2

Cyber risk is undeniably one of the most critical emerging risks to the financial industry. However, even though cyber risk is recognized as a significant threat to financial institutions and, more generally, to financial stability, the lack of proper data on cyber risk losses impedes efforts to effectively measure and manage this risk. This paper aims to address this gap by providing a cyber risk definition and classification scheme for risk management purposes, to be used as a data collection template for financial institutions. As such, the proposed scheme would ensure that the adopting institutions utilize common language and would allow consistent data collection and sharing. We provide a deeper dive into the reasoning behind the variables we propose to collect and demonstrate how some of the existing cyber security events map into our proposed scheme.

Keywords: Operational Risk, Nonfinancial Risk, Cyber Risk, Risk Measurement, Banking, Data Collection 

This paper presents a case study of how communication on monetary policy rules in Israel allows for discretionary deviations within a rule-like policy framework without impairment to central bank credibility. We quantitatively analyze a monetary policy rule that has described Bank of Israel policy formally since 2012 and informally since 2007. We demonstrate the value of a policy rule as a tool of communication and show how policymakers leverage this rule in times of economic uncertainty. We identify periods of discretionary deviation from the policy rule and show how communication on financial stability concerns derived from monthly interest rate announcements explains these deviations. Finally, we show how policymakers in Israel were able to anchor market expectations, even in times of great economic uncertainty. 

Keywords: Monetary Policy Rules, Expectations, Central Bank Communication, Bank of Israel