Date and Time: April 16th, 2019, 10:00 - 11:30 am

Room: Dongliuzhai, Meeting Room on the 1st floor (Old Campus)


Since 2001, the People Bank of China (PBoC) use its communication to manage market expectations. To check whether PBoC's communication affect expectations of market participants and matter as a monetary policy instrument, we test the impact of the sentiment of PBoC's communication on asset prices. For that purpose, we first rely on a computational linguistic tool to compute the sentiment of PBoC's speeches and second, we use a high frequency methodology to estimate the effects of sentiment on asset prices. Our results show that positive changes of sentiment affect positively equity prices in the Shanghai and the Shenzhen stocks markets and that negative changes of sentiment increase bond yield and market rate at longer maturity, i.e. the 10-year government bond yield and the 3-month money market rate, respectively. Additional extensions show that PBoC's communication does not have a persistent effect on equity prices beyond the speech-day and that the sentiment of PBoC's communication still has a positive and significant impact on equities even when controlling for all the monetary policy instruments implemented by the PBoC. Hence, our findings show that PBoC's communication matter as a monetary policy instrument to shape market expectations and to move asset prices.

About the Speaker

Hamza Bennani is associate professor at the Université de Paris-Nanterre. His research focuses on the political economy of central banking, including central banks´ communication policy and decision-making process.