Occasionally, a seemingly bizarre question has a simple answer.
In an email to clients Tuesday, Torsten Sløk, chief international economist at Deutsche Bank, presented a chart of the Flesch-Kincaid readability level of the Federal Reserve’s monetary policy statements.
Sløk points out that the reading level of the statements that are released after every Federal Open Markets Committee decision on monetary policy has dropped during current Chair Janet Yellen’s tenure.
While we have no explanation as to why (Increased transparency? Changes in the length of statements?), there was another interesting tidbit that really caught our eye: During the tenure of former Chair Alan Greenspan, a monumental drop occurred in the reading level seemingly out of nowhere. What in the world happened in 2002?
Between 1994 and 2002, the reading level of Chair Greenspan’s statements fluctuated between 13.5 and 19.5. Between 2001 and 2002, however, there was a drop in the statement’s difficulty from around a 17.5 level to approximately 9.5.
In a cursory search of the statements between 2000 and 2003, it appears that they are essentially the same. Short, three or four paragraph statements on the policy decision and economic outlook from the FOMC.
At the bottom of the statements, however, the key difference appears.
In 2002 the FOMC began to release the roll call of how various members voted on the policy proposals. This would appear to be the source of the precipitous drop, since names are simple to read. It seems that Greenspan’s Fed didn’t become any more clear or simplistic in explaining themselves, they just started listing names.
We suppose you can just chalk it up to another odd quirk in the history of the Fed.
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