The effect of central bank communication on sovereign bond yields: The case of Hungary

In this article we investigate how the public communication of Hungarian Central Bank’s Monetary Council (MC) affects sovereign bond yields. This research ties into advances made in financial and political economy literature which rely on extensive textual data quantitative text analysis tools. While prior demonstrated that forward guidance, form council meeting minutes or press releases can be used as predictors rate decisions, are interested whether they able to directly influence asset returns well. order capture effect central bank communication, measure latent hawkish dovish sentiment MC from 2005 2019 by applying a dictionary, staple mining toolkit. Our results show guidance has an intra-year However, no impact maturities one year longer where policy proves most important explanatory variable. also contributes specialized dictionary monetary well broadening discussion analyzing case non-eurozone Central-Eastern region European Union.