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Topic Classification of Central Bank Monetary Policy Statements: Evidence from Latent Dirichlet Allocation in Lesotho

Topic Classification of Central Bank Monetary Policy Statements: Evidence from Latent Dirichlet... AbstractThis article develops a baseline on how to analyse the statements of monetary policy from Lesotho’s Central Bank using a method of topic classification that utilizes a machine learning algorithm known as Latent Dirichlet Allocation. To evaluate the changes in the policy distribution, the classification of topics is performed on a sample of policy statements spanning from February 2017 to January 2021. The three-topic Latent Dirichlet Allocation model extracted topics that remained prominent throughout the sample period and were most closely reflective of the functions of the Central Bank of Lesotho Monetary Policy Committee. The topics identified are: (i) International Monetary and Financial Market Conditions; (ii) Monetary Policy Committee and International Reserves; (iii) Regional and International Economic Policy Conditions. The three-topic Latent Dirichlet Allocation model was determined as the most appropriate model through which a consistent analysis of topic evolution in Central Bank of Lesotho Monetary Policy Statements can be performed. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Acta Universitatis Sapientiae, Economics and Business de Gruyter

Topic Classification of Central Bank Monetary Policy Statements: Evidence from Latent Dirichlet Allocation in Lesotho

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Publisher
de Gruyter
Copyright
© 2022 Moeti Damane, published by Sciendo
eISSN
2360-0047
DOI
10.2478/auseb-2022-0012
Publisher site
See Article on Publisher Site

Abstract

AbstractThis article develops a baseline on how to analyse the statements of monetary policy from Lesotho’s Central Bank using a method of topic classification that utilizes a machine learning algorithm known as Latent Dirichlet Allocation. To evaluate the changes in the policy distribution, the classification of topics is performed on a sample of policy statements spanning from February 2017 to January 2021. The three-topic Latent Dirichlet Allocation model extracted topics that remained prominent throughout the sample period and were most closely reflective of the functions of the Central Bank of Lesotho Monetary Policy Committee. The topics identified are: (i) International Monetary and Financial Market Conditions; (ii) Monetary Policy Committee and International Reserves; (iii) Regional and International Economic Policy Conditions. The three-topic Latent Dirichlet Allocation model was determined as the most appropriate model through which a consistent analysis of topic evolution in Central Bank of Lesotho Monetary Policy Statements can be performed.

Journal

Acta Universitatis Sapientiae, Economics and Business – de Gruyter

Published: Sep 1, 2022

Keywords: monetary policy statement; topic modelling; central bank; Lesotho; Latent Dirichlet Allocation; E5; E52; E58

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