Academic Macroeconomics and Monetary Policy: Topic Modeling Based on Transcripts of the Meetings of the Federal Open Market Committee from 1976 to 2016

Abstract

This article explores the place of academic macroeconomics discourse in the discussions of monetary policy makers, using the transcripts of meetings of the Federal Open Market Committee (FOMC) from 1976 to 2016. Latent Dirichlet Allocation (LDA) is used to separate the transcripts into topics of discussion. The article shows that policy makers with a PhD in economics contributed more to the discussion of econometric models and theoretical frameworks. At the same time, they were not inclined to discuss issues of monetary policy credibility to a greater extent. Having received a PhD from a “freshwater” or a “saltwater” school of macroeconomics was found to not be linked with a greater or lesser contribution to the discussion of the “academic” topics. This article’s findings support the existing evidence for the growing link between academia and central banks, demonstrating an increase in the discussion of econometric models and theoretical frameworks in recent decades.