Extracting the Federal Reserve's priorities and transparency from FOMC statements using textual data mining tools

In this paper, we aim to investigate the priorities of the Federal Reserve (Fed) and transparency under three different chairpersons. Specifically, we investigated the chairperson's influence on monetary policy over time and what issues were considered when setting new monetary targets under each chairperson. Data came from the statements of Federal Open Market Committee (FOMC) meetings from March 2006 to May 2024. The sample period covered the chairmanships of Ben Bernanke, Janet Yellen, and current chairman Jerome Powell. Textual data mining is a tool used to extract terms that correspond to several economic issues that the Fed may consider when setting monetary policy during FOMC meetings. We tracked the frequency of mentioning certain terms related to economic issues throughout 146 FOMC statements. The results show that Fed Chairman Bernanke has completely different ranking priorities from the other two. Yellen and Powell have identical priorities rankings (as revealed in the FOMC statements). Overall, inflation and the financial market were the highest priorities under all three chairmanships. With respect to transparency, Bernanke's term has the lowest level, and Powell had the highest level, followed by Yellen.