This website uses cookies.

By clicking the "Accept" button or continuing to browse our site, you agree to first-party and session-only cookies being stored on your device to enhance site navigation and analyze site performance and traffic. For more information on our use of cookies, please see our Privacy Policy.

  1. Home
  2. ASSA Annual Meeting
  3. 2026
  4. Program
  5. Central Banks and Information
« Back to Results

Central Banks and Information

Paper Session

Sunday, Jan. 4, 2026 8:00 AM - 10:00 AM (EST)

Philadelphia Convention Center, 203-A
Hosted By: American Economic Association
  • Chair: Joseph Abadi, Federal Reserve Bank of Philadelphia

A Welfare Analysis of the Central Bank Balance Sheet

William Pagel
,
University of Oxford, Bank of England

Abstract

During the period when interest rates were constrained at the effective lower bound, central banks relied on balance sheet expansions to set the stance of monetary policy. But in the long-run, when rates are away from their lower-bound, these balance sheet policies are not needed to provide stimulus.
This paper asks: what is the socially optimal size for the central bank balance sheet in the long-run? I introduce a central bank into a simple endowment economy model in which banks are liquidity mismatched and prone to sudden "bank runs". In this framework, the long-run provision of central bank reserves can reduce the likelihood of bank runs, at the cost of crowding out more productive investments. I calibrate the model to conditions before the financial crisis, and demonstrate that the model can reproduce important non-linearities in the data on the demand curve for reserves, as reserve supply moves from scarce to abundant. I compute the socially optimal size of the central bank and find that it is optimal for the central bank to expand supply of reserves almost to the point where their marginal liquidity benefit is zero, and reserve demand is satiated, but no further.

Bargaining over Words? Text Analysis of a Model of Monetary Policy by a Committee

Taeyoung Doh
,
Federal Reserve Bank of Kansas City
Hie Joo Ahn
,
Federal Reserve Board
Thomas R Cook
,
Federal Reserve Bank of Kansas City

Abstract

Many central banks make policy decision collectively in the form of a committee.
With the increased public communications of policy actions, wording
over policy statements became important tools for committee members to express
their views. Using text analysis of transcripts of the Federal Open Market
Committee (FOMC) meetings and FOMC statements, we explore the interaction
among FOMC members over statement language. Specifically, we examine how
statement language aggregates preferences of individual participants expressed
during FOMC meetings. In addition, we isolate surprise components in statement
language by contrasting the released statement with the private sector’s
expectation of statement by using the proprietary data on the statement draft
circulated among financial market participants before FOMC meetings. Our findings
suggest that the surprise component in the sentiment on interest rate policy is
associated with the market’s updated belief about the Federal Reserve’s reaction
to news white the surprise component in the sentiment on inflation conditions or
risks to the outlook is associated with stock market responses.

Central Bank Losses and Inflation: Evidence from 350 Years

Grodecka-Messi Anna
,
Sveriges Riksbank
Martin Kliem
,
Bundesbank
Gernot Müller
,
University of Tuebingen

Abstract

Are central bank losses inflationary? We address this question at two levels. First, we revisit the theory and show that central bank losses constrain the conduct of monetary policy and are indeed inflationary provided the central bank is (a) not automatically recapitalized by the government and (b) concerned about its net worth. Second, we collect 350 years of data on the world's oldest central bank, the Sveriges Riksbank. We construct a time series for its return on assets and a narrative measure of return shocks. We find that inflation increases strongly and persistently in response to an adverse return shock.

Leadership, Gender, and Discourse in Monetary Policy: Analyzing Speech Dynamics in the FOMC

Chen Xie
,
University of Illinois-Chicago

Abstract

Using a novel hand-collected dataset, this paper employs natural language processing
and a quasi-experimental approach to investigate the determinants of speech share
among members of the Federal Open Market Committee (FOMC). First, given the
novelty of the data, I describe key correlations between speech share and FOMC members’
gender, education, and tenure status. The second section of the paper uses a
difference-in-differences approach to examine whether the appointment of Chair Janet
Yellen affected the gender gap in FOMC speech shares. I find that the baseline gender
gap of 1.2 percentage points narrows to 0.4 percentage points as a result of Yellen’s
appointment. Additionally, I find that the expression of opinions in FOMC members’
speeches dropped by 7.7 percentage points overall, with female members decreasing
by an additional 2.5 percentage points. Despite these changes in discourse style, a
significant relationship persists between opinion shares and deviations from the Taylor
Rule-implied policy rate, with female members responding more strongly than their
male counterparts. This study provides new insights into how leadership and gender
influence the internal dynamics of monetary policy discussions within the FOMC.
JEL Classifications
  • E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit