Abstract
The paper applies Google’s Natural Language sentiment analysis to monetary policy statements and speeches of G3 central banks and examines the role of changes in the tone of statements on exchange rates after the great recession. The results show that one standard deviation increase in the sentiment of FOMC and ECB statements lead to depreciation of Dollar by 32 basis points and appreciation of Euro by 25 basis points respectively. Moreover, sentiment of monetary policy speeches is positively correlated with the sentiment of subsequent monetary policy statements for the three major central banks.
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