How does sentiment in Monetary Policy Committee (MPC) announcement affect the exchange rate in Turkiye?

Changes in the global financial structure necessitated the shift of monetary policy instruments and increased the transparency of central banks. Thanks to advances in analysis methods, text analysis methods were improved and non-digitizable data types became digitizable. In this direction, the sentiment scores were obtained by examining the decision texts of the Monetary Policy Committee (MPC) with the sentiment analysis methods. After examining whether the mentioned text sentiment scores influence the exchange rate using the event study analysis. Under this background using whole sample estimates and rolling window estimates is to understand whether the effect is time-varying. The study used 191 Monetary Policy Committee (MPC) decision texts between the 2006-2022 period published by the Central Bank of the Republic of Turkey (CBRT). Estimation results show that the measured MPC meeting sentiment influences the USD/TRY exchange rate. Sentiment analysis indicators can be used to estimate the change in the future interest rate and support future central bank decisions and manage expectations. Furthermore, it can be analyzed whether the published MPC texts reflect the change in interest rates. The sentiment index can be used as an indicator for other econometric models that increase the explanatory power of the model.