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Emotion in Euro Area Monetary Policy Communication and Bond Yields – The Draghi Era
This study uses modern methods from Speech Emotion Recognition and Natural Language Processing to examine how the tone and words of European Central Bank President Mario Draghi influenced sovereign bond yields in major euro area countries. We find that both vocal and verbal emotions in central bank communication have significant and varied effects on financial markets. Positive signals raised yields in Germany, France, and Spain, while negative signals increased Italian yields. Our findings suggest that positive communication influences the risk-free yield component, whereas negative cues affect the risk premium.