Monetary policy

Engineering

Volatility (finance)

Similarity (geometry)

Economics

Computer science

Business

Mechanical engineering

Image (mathematics)

Monetary economics

Blank

Econometrics

Central bank

Artificial intelligence

Financial economics

Journal of Monetary Economics

Central banks often draft press releases announcing monetary policy decisions starting from the previous release. This makes it straightforward to see how the content has evolved, but may make substantial updates harder to interpret, as markets learn to expect only minor updates. Using variation in the drafting process at the Bank of Canada, this paper finds that similar press releases reduce market volatility, whereas volatility rises when substantial changes occur after sequences of similar statements. A comparison over time and across central banks shows that market sensitivity to similarity adjusts to the drafting practice of central banks.

Starting from a blank page? Semantic similarity in central bank communication and market volatility