central_bank_communication

Replication materials for the 'The effect of central bank communication on sovereign bond yields: The case of Hungary' article

• central_bank_communication
  • 01_pr_sentiment_analysis.R
  • 02_mc_cohesion_index.R
  • 03_yield_scores.DO
  • 04_yield_scores_transform.R
  • 05_final_dataset_prep.R
    • Variables in the dataset
  • 06_figures.R
  • 07_ardl_analysis
  • 08_robustness_analysis.R
  • 09_sentiment_examples.R
  • System information

This repository contains the neccesary source codes to reproduce the analysis in the article. The R source code is in the scripts folder, the needed data is in the data/input and data/output folders. For a detailed description of each script see below.

01_pr_sentiment_analysis.R

This script replicates the sentiment scores using the press release text data and the dictionary we created. The text analysis is done in R with the quanteda package. The sentiment scores for the Newey-West OLS robustness check using the L-M and AGH dictionaries are also computed in this script.

02_mc_cohesion_index.R

This script replicates the monetary council cohesion index calculation. It uses as input the excel sheet available at the webpage of the Central Bank of Hungary (MNB): https://www.mnb.hu/en/monetary-policy/the-monetary-council/voting-records-of-the-monetary-council-members (last accessed: 2020/05/06). The scripts contains the step by step instructions for the index reproductions. The input file used for this script is data/input/mnb-mt-voting.xlsx.

03_yield_scores.DO

The do file creates the scores.xlsx from the data/input/yields.xlsx file, which contains the PCA scores for the short, medium and long term bond yields.

04_yield_scores_transform.R

The R script transforms the PCA scores from the Stata output by rescaling and log transforming the variables.

05_final_dataset_prep.R

The output of this script is the final dataset which is used for creating the figures and tables in the article. NB: Missing data is coded as '.' (for Stata compatibility).

This script assembles the parts created above and merges them into the macro controls. The macro controls are in the data/input/data_macro.csv file.

Variables in the dataset

• date: Year-month string
• i: Central bank base rate
• USD: USD/HUF exchange rate
• EUR: EUR/HUF exchange rate
• u: Unemployment rate
• m3: M3 money stock
• core_i_yoy: Core inflation, year on year change
• pmi: Purchasing Managers' Index
• log_total: logarithm of the rescaled combined yield factor scores (all time horizon)
• log_in_year: logarithm of the rescaled r3m r6m yield factor scores
• log_out_year: logarithm of the rescaled r1y r3y r5y r10y r15y yield factor scores
• log_intra_year: same as log_in_year
• log_1to3year: logarithm of the rescaled r1y r3y yield factor scores
• log_long_term: logarithm of the rescaled r5y r10y r15y factor scores
• total_resc: rescaled combined yield factor scores (all time horizon)
• in_year_resc: rescaled r3m r6m yield factor scores
• out_year_resc: rescaled r1y r3y r5y r10y r15y yield factor scores
• short_term_resc: same as in_year_resc
• medium_term_resc: rescaled r1y r3y yield factor scores
• long_term_resc: rescaled r5y r10y r15y factor scores
• r3m: yields of bonds with maturity rates of 3 months
• r6m: yields of bonds with maturity rates of 6 months
• r1y: yields of bonds with maturity rates of 1 years
• r3y: yields of bonds with maturity rates of 3 years
• r5y: yields of bonds with maturity rates of 5 years
• r10y: yields of bonds with maturity rates of 10 years
• r15y: yields of bonds with maturity rates of 15 years
• mt_cohesion: The cohesion index of the monetary council
• date_text: The release date of the press release
• nethawkish: the Hawkish sentiment score computed with our dictionary on the press release corpus
• lm_baseline: sentiment scores with dictionary baseline using the Loughran-McDonald dictionary (net positive) on the the press release corpus
• net_hawk_agh: the Hawkish sentiment score computed with the AGH dictionary
• monthly_mlf: ECB interest rates
• fed_i: US FED interest rates
• effective_fed_i: Effective US FED interest rates
• ecb_bs: ECB balance sheet
• fed_bs: FED balance sheet
• Simor: Central bank governor dummy. 1 for months when Andras Simor was the governor
• Matolcsy: Central bank governor dummy. 1 for months when Gyorgy Matolcsy was the governor

06_figures.R

This script recreates the Tables 1-2, Figures 1-3; 7-9.

07_ardl_analysis

This is the source code for the ARDL analysis and the corresponding test statistics. It also produces the QQ plots (Figs 4-6) in the appendix and the contents of Tables 3, 4 and 5.

08_robustness_analysis.R

The code for the Newey-West OLS robustness check in Appendix C, and produces the results in Table 9.

09_sentiment_examples.R

The code to replicate the sentiment calculation highlights in Table 10 in Appendix D.

System information

R Session Info

> sessionInfo()
R version 4.0.0 (2020-04-24)
Platform: x86_64-w64-mingw32/x64 (64-bit)
Running under: Windows 10 x64 (build 18363)

Matrix products: default

locale:
[1] LC_COLLATE=English_United States.1252
[2] LC_CTYPE=English_United States.1252
[3] LC_MONETARY=English_United States.1252
[4] LC_NUMERIC=C
[5] LC_TIME=English_United States.1252
system code page: 1250

attached base packages:
[1] stats     graphics  grDevices utils     datasets  methods   base

loaded via a namespace (and not attached):
[1] compiler_4.0.0

Stata version info

Stata/IC 16.0 for Windows (64-bit x86-64)