We construct a new measure of monetary policy surprise based on a natural language processing algorithm designed to capture contextual nuances in FOMC statements. Specifically we exploit cross-sectional variations across alternative FOMC statements to identify the statement's tone, and compare...

A purported benefit of state-based forward guidance is that the private sector adjusts the expected stance of policy without further policymaker communications. This assumes a shared understanding of how policymakers are interpreting the data and that policymakers are consistent in their...