Abstract#
Quantifying Central Bank Policy Uncertainty in Cambodia: A Topic Modeling Approach
In economies like Cambodia, characterized by limited development in monetary policy tools and a heavy reliance on dollarization, understanding and measuring central bank policy uncertainty becomes crucial for predicting economic outcomes. This study ventures into the realm of quantifying central bank policy uncertainty in Cambodia, providing a detailed analysis that is essential for navigating the unique challenges in its monetary landscape. Utilizing a dual-model approach based on Latent Dirichlet Allocation (LDA), this research classifies and quantifies the intensity of policy uncertainty in pivotal areas such as exchange rate policy, currency stabilization, and de-dollarization efforts. The study harnesses a comprehensive dataset, compiled from major Cambodian news outlets from 2014 to 2023, processed through sophisticated automated methods. This approach allows for the estimation of document-topic and topic-word distributions, from which measures of policy uncertainty are derived. The study delves into a narrative evaluation and comparative analysis of these topic-based uncertainty measures, juxtaposed against established uncertainty indices. This rigorous evaluation yields a thorough understanding of the specific sources of policy uncertainty and their developmental trajectories over time. The findings provide critical insights into the nuances of economic policy uncertainty in emerging economies like Cambodia. The implications of this study are far-reaching, impacting various stakeholders, including economists, policymakers, investors, and business leaders. The insights gleaned are not only vital for risk assessment and decision-making but also for the formulation of effective monetary policies and strategic planning. Looking ahead, the study proposes the integration of additional analytical dimensions, such as sentiment analysis and machine learning predictions, to enhance the granularity and depth of understanding of economic uncertainty. This research stands as a significant contribution to the discourse on economic policy uncertainty, particularly in the context of Cambodia’s unique monetary policy environment. It underscores the need for and effectiveness of innovative approaches in tackling the intricacies of policy uncertainty in emerging economies.