A High-Frequency Analysis of the Effects of Central Bank Communication on the Term-Structure of Interest Rates in Brazil

Orientador(a): Carlos Viana de Carvalho

This work analyzes the effect of the central bank’s communication on the interest rate curve. To do so, we seek to quantify the content of the statement released by the Central Bank of Brazil after the Selic rate’s decision and we build semantic scores using the Google and the Factiva Dow Jones’ search queries, based on Lucca and Trebbi (2011). These scores capture the semantic orientation of the statements, in
other words, if they have a "hawkish" or a "dovish” bias. We note that movements of the semantic scores anticipate movements of the Selic rate. Using intraday data, we analyzed its effect in the term structure of interest rates in different periods of time in the following business day after the statement release, controlling for the effects of the monetary policy surprises. We note that there is an intraday dynamic throughout the day. However, analyzing the period before and during Tombini’s mandate, it does not seem to be clear in which maturities the semantic scores have significant effects.