From Text to Quantified Insights: A Large-Scale LLM Analysis of Central Bank Communication

IMF Working Papers, June 6, 2025

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Canonical URL: From Text to Quantified Insights: A Large-Scale LLM Analysis of Central Bank Communication

Paper introduces a classification framework to analyze central bank communications across four dimensions: topic, communication stance, sentiment, and audience.
Uses a fine-tuned large language model trained on central bank documents to classify individual sentences and convert policy language into systematic, quantifiable metrics.
Applied to a multilingual dataset of 74,882 documents from 169 central banks spanning 1884 to 2025.
Presents what the authors describe as the most comprehensive empirical analysis of central bank communication to date.

Classification framework dimensions: topic, communication stance, sentiment, audience.
Model approach: fine-tuned large language model trained on central bank documents to label individual sentences.
Dataset scale and coverage:
- 74,882 documents
- 169 central banks
- Time span: 1884 to 2025

Monetary policy communication changes significantly with inflation targeting:
- Backward-looking exchange rate discussions give way to forward-looking statements on inflation, interest rates, and economic conditions.
Directional signals:
- Development of a directional communication index capturing signals about future policy rate changes and unconventional measures, including forward guidance and balance sheet operations.
- This unified signal helps explain future movements in market rates.
Audience tailoring quantified:
- First systematic quantification showing central banks tailor messages to audiences.
- Audience-specific risk communication has remained stable for decades, suggesting a structural and deliberate tone.
- Typical patterns by audience:
- Neutral, fact-based language with financial markets
- Confidence-building language with the public
- Emphasis on risks when communicating to governments

Captures signals about:
- Future policy rate changes
- Unconventional measures, including forward guidance and balance sheet operations
Empirical role:
- The unified signal helps explain future movements in market rates

Communication shifts markedly during crises:
- Confidence-building rises in communication to the financial sector and government
- Risk signaling increases for other audiences during crises
Forward-looking risk communication predicts future market volatility:
- Demonstrates that central bank language influences both monetary and financial stability channels

Communication as active policy tool:
- Findings provide novel evidence that communication is an active policy tool for steering expectations and shaping economic and financial conditions
Importance of measuring language:
- Quantified, directional, and audience-specific signals can inform assessments of expected policy actions and potential financial stability implications