Template-Type: ReDIF-Paper 1.0
Author-Name: Ana Aguilar
Author-X-Name-First: Ana
Author-X-Name-Last: Aguilar
Author-Name: Fernando Pérez-Cervantes
Author-X-Name-First: Fernando
Author-X-Name-Last: Pérez-Cervantes
Title: Communication, monetary policy, and financial markets in Mexico
Abstract: We determine if the communication of private banks to their clients with financial interests in Mexico changes or not after Mexico's Central Bank communicates its monetary policy decision (MPD) and also two weeks later, with the publication of the minutes of Mexico's Central Bank monetary policy decision (MMPD) between 2011 and 2019. We use unsupervised Natural Language Processing (NLP) techniques to turn the text that private banks send to their clients about the Mexican economy into vectors of topics. We find that every time, private banks cover a large diversity of topics and words before the MMPD with no evident consensus of topics, and that almost always the quantities of terms and topics are reduced and repeated by almost every bank after the MMPD indicating some surprise (notable exception: the liftoff in December 2015), and that the topics vary depending on the date of the MMPD. The fact that private banks discuss the same topics and write to their clients with sentences that contain the exact same words indicates that the private banks react to the MMPD, independent of their opinion about the Central Bank's statements. We also found weak evidence that a measure of the size of the changes in the private bank's communication with their clients is positively correlated to changes in the long-term yields but negatively correlated to the size of exchange rate movements.
Length: 46 pages
Creation-Date: 2022-06
File-URL: https://www.bis.org/publ/work1025.pdf
File-Format: Application/pdf
File-Function: Full PDF document
File-URL: https://www.bis.org/publ/work1025.htm
File-Format: text/html
Number: 1025
Keywords: natural language processing, unsupervised sentence embedding, central bank communication, Mexico
Classification-JEL: C6, E5, E6
Handle: RePEc:bis:biswps:1025