Bianchi, F, Gomez Cram, R, Kind, T and Kung, H (2019) Threats to Central Bank Independence: High-Frequency Evidence with Twitter. Working Paper. Social Sciences Research Network. (Submitted)
Abstract
This paper presents market-based evidence that President Trump influences expectations about monetary policy. The main estimates use tick-by-tick fed funds futures data and a large collection of Trump tweets criticizing the conduct of monetary policy. These collected tweets consistently advocate that the Fed lowers interest rates. Identification in our high-frequency event study exploits a small time window around the precise time stamp for each tweet. The average effect of these tweets on the expected fed funds rate is strongly statistically significant and negative, with a cumulative effect of around negative 10 bps. Therefore, we provide evidence that market participants believe that the Fed will succumb to the political pressure, which poses a significant threat to central bank independence.
More Details
Item Type: | Monograph (Working Paper) |
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Subject Areas: | Finance |
Additional Information: |
Wheeler Institute for Business and Development |
Date Deposited: | 19 Dec 2022 12:03 |
Last Modified: | 01 Oct 2024 12:19 |
URI: | https://lbsresearch.london.edu/id/eprint/2756 |