Soft information and economic activity: Evidence from the Beige book
Author(s)
Sadique, Shibley
In, Francis H.
Veeraraghavan, Madhu
Wachtel, Paul A.
Year published
2013
Metadata
Show full item recordAbstract
This study employs text-analysis software to analyze the contents of the Federal Reserve Beige Book summary of national economic and business conditions, with a particular focus on the predictive content of the text. We show that the Beige Book language is a good predictor of economic turning points as it often provides an early indication of future economic activities. During economic upswings, positive tone becomes more prominent and negative tone becomes less prominent. In addition, this study is the first to document that Beige Book tone affects stock market volatility and trading volume.This study employs text-analysis software to analyze the contents of the Federal Reserve Beige Book summary of national economic and business conditions, with a particular focus on the predictive content of the text. We show that the Beige Book language is a good predictor of economic turning points as it often provides an early indication of future economic activities. During economic upswings, positive tone becomes more prominent and negative tone becomes less prominent. In addition, this study is the first to document that Beige Book tone affects stock market volatility and trading volume.
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Journal Title
Journal of Macroeconomics
Volume
37
Subject
Applied Economics not elsewhere classified
Economic Theory
Applied Economics