The effects of Brazilian Central Bank Communication on the Yield Curve

The effects of Brazilian Central Bank Communication on the Yield Curve

• Author
• Cássio Roberto de Andrade Alves
• Co-authors
• Márcio Poletti Laurini
• Abstract

• This paper investigates the bidirectional relation between the Brazilian Central Bank Communication and the yield curve. Using latent factors, observable macroeconomic variables, and observable variables representing central bank communication, we estimate a model that summarizes the yield curve. We find evidence of the effects of Brazilian Central Bank Communication on the movements of the yield curve and the impact of the yield curve components in Brazilian central bank communication. In particular, Central Bank Communication can shape yield curve curvature and slope. Additionally, we find a strong relation between Central Bank Communication and the curvature of the yield curve. These results show that Central Bank Communication impacts market players, making it a valuable instrument for monetary policy.

• Keywords
• Yield Curve, Sentiment Analysis, Bayesian Estimation, Central Bank Communication
• Subject Area
• Econometrics and Numerical Methods

Back Download