Spread the Word: International Spillovers from Central Bank Communication

BIS Working Papers  |  No 824  | 
02 December 2019


Since the 1990s, central banks have made policy announcements both more frequently and with more ambitious aims. Now regarded as a policy tool in its own right, central bank communications are closely watched by financial markets. In this paper, we construct a novel data set comprising the English versions of central bankers' speeches from 23 countries over the 2002-17 period, as sourced from the speech archive of the Bank for International Settlements. The sentiment of each speech is analysed using dictionary-based methods. We then assess how central banks affect each other's communication across borders, as well as critical macroeconomic and policy variables.


That central bank communication affects domestic interest rates and macroeconomic variables is already well known. Moreover, central bank communication has been shown to be particularly effective during periods of unconventional policy.

This paper introduces a novel and comprehensive data set of sentiment scores for international central bank communication and makes the first attempt to study international central bank communication spillovers across a large set of central banks.


Shocks from central bank communications can affect sentiment across borders, as well as policy rates and macroeconomic variables. In this, the Federal Reserve plays a uniquely influential role. We find that the extent to which central banks affect each other's communication across borders cannot be fully explained by trade or financial flows but it does appear that these effects weaken with geographic distance, even after controlling for reduced trade and financial flows. In addition, a shared language or colonial ties also tend to amplify the cross-border effects of central bank communications.


We construct a novel text dataset to measure the sentiment component of communications for 23 central banks over the 2002-2017 period. Our analysis yields three results. First, comovement in sentiment across central banks is not reducible to trade or financial flow exposures. Second, sentiment shocks generate cross-country spillovers in sentiment, policy rates, and macroeconomic variables; and the Fed appears to be a uniquely influential generator of such spillovers, even among prominent central banks. And third, geographic distance is a robust and economically significant determinant of comovement in central bank sentiment, while shared language and colonial ties have weaker predictive power.

JEL codes: E52, E58, F42

Keywords: communication, monetary policy, international policy transmission