Structural Estimation with Unstructured Data

We augment a standard state-space model with a non-core measurement block that links structural shocks to time series derived from Federal Open Market Committee transcripts, using a spike-and-slab prior to let the data select which series are informative. In a medium-scale New Keynesian model for the United States, incorporating text improves predictive performance and materially alters structural inference: The new model estimates a lower response of the policy rate to inflation, higher price stickiness, and lower price indexation, implying a flatter and less backward-looking price Phillips curve.