A Concern Analysis of FOMC Statements Comparing The Great Recession and The COVID-19 Pandemic

TL;DR

This paper compares Federal Reserve statements during the Great Recession and the COVID-19 pandemic using NLP to identify shared and unique concerns, revealing notable similarities in their expressed monetary policy considerations.

Contribution

It introduces a novel NLP-based concern analysis of Federal Reserve statements across two major crises, highlighting both commonalities and differences in monetary policy focus.

Findings

Similar concerns in Fed statements during both crises

Distinct concerns emerging in COVID-19 period

Trend analysis of concern evolution over time

Abstract

It is important and informative to compare and contrast major economic crises in order to confront novel and unknown cases such as the COVID-19 pandemic. The 2006 Great Recession and then the 2019 pandemic have a lot to share in terms of unemployment rate, consumption expenditures, and interest rates set by Federal Reserve. In addition to quantitative historical data, it is also interesting to compare the contents of Federal Reserve statements for the period of these two crises and find out whether Federal Reserve cares about similar concerns or there are some other issues that demand separate and unique monetary policies. This paper conducts an analysis to explore the Federal Reserve concerns as expressed in their statements for the period of 2005 to 2020. The concern analysis is performed using natural language processing (NLP) algorithms and a trend analysis of concern is also presented. We observe that there are some similarities between the Federal Reserve statements issued during the Great Recession with those issued for the 2019 COVID-19 pandemic.