Work in progress:

Fed Sentiment and Expectations: Evidence from Speeches by FOMC Members
with Eleonora Granziera and Greta Meggiorini.

This paper investigates whether the Federal Reserve (Fed) can influence the expectations of economic agents through the speeches of the Federal Open Market Committee (FOMC) members and regional Fed presidents. Using textual analysis, we construct a sentiment index for inflation. We find that this index drives inflation expectations of households, professional forecasters and market participants. However, the speeches are able to sway inflation expectations only in the sample that starts with the Great Financial Crisis. We find that also FOMC inflation projections are able to steer inflation projections of both expert and non-experts. Finally, inflation expectations are more affected by the sentiment index when inflation is rising. These results bear important implications for the Fed communication strategy: economic agents are listening and speeches are an effective communication tools.

aura Pagenha

Working papers:

Where do they care? The ECB in the media and inflation expectations
with Nicolò Maffei-Faccioli and Laura Pagenhard

This paper examines how news coverage of the European Central Bank (ECB) affects consumer inflation expectations in the four largest euro area countries. Utilizing a unique dataset of multilingual European news articles, we measure the impact of ECB-related inflation news on inflation expectations. Our results indicate that German and Italian consumers are more attentive to this news, whereas in Spain and France, we observe no significant response. The research underscores the role of national media in disseminating ECB messages and the diverse reactions among consumers in different euro area countries.


Climate Risk and Commodity Currencies
Leif Anders Thorsrud and Felix Kapfhammer.

Climate change increases the likelihood of extreme climate- and weather-related events, but also the pressure for adjusting towards a lower-carbon economy. We propose a novel measure of climate change transition risk and document that when it unexpectedly increases, major commodity currencies experience a persistent depreciation in line with traditional "Dutch disease" arguments. Furthermore, when analyzing a rich set of countries we find a significant negative correlation between a country's average fossil fuel export dependency and exchange rate response following innovations in transition risk. None of these findings apply when using existing climate risk proxies, highlighting the importance of distinguishing between different climate risk components when analyzing the economic consequences of climate change.
Media coverage: Dagens Næringsliv, 


Business cycle narratives
with Leif Anders Thorsrud.

This article quantifies the epidemiology of media narratives relevant to business cycles in the US, Japan, and Europe (euro area). We do so by first constructing daily business cycle indexes computed on the basis of the news topics the media writes about. At a broad level, the most important news narratives are shown to be associated with general macroeconomic developments, finance, and (geo-)politics. However, a vast set of narratives contributes to our index estimates across time, especially in times of expansion. In times of trouble, narratives associated with economic fluctuations become more sparse. Likewise, we show that narratives do go viral, but mostly so when growth is low. While narratives interact in complicated ways, we document that some are clearly associated with economic fundamentals. Other narratives, on the other hand, show no such relationship, and are likely better explained by classical work capturing the market’s animal spirits.