This paper uses text analysis to estimate the potential for improving market-implied policy expectations through increased transparency from the Federal Open Market Committee (FOMC). The authors find that making FOMC meeting materials with five-year lagged release dates, such as meeting transcripts and Tealbooks, publicly available in real time could significantly improve forecasting accuracy during easing cycles. For example, at a six-month forecasting horizon, the market could have predicted an additional 125 basis points of easing during the 2001 and 2008 recessions, equivalent to a 40-50 percent reduction in mean squared error. The authors attribute this potential improvement to incomplete information about the Fed's reaction function, particularly with respect to financial stability concerns in 2008. However, the authors find that enhanced access to meeting materials would not have improved the market's policy rate forecasting during tightening cycles. The paper is classified under JEL codes E43, E52, E58, and C80.
