Interpreting the Interpreter: Can We Model post-ECB Conferences Volatility with LLM Agents? (opens in new tab)

Central banks cannot observe market reactions to their communications before release. We propose a framework in which Large Language Models simulate 30 heterogeneous traders interpreting European Central Bank press conference transcripts, yielding a measure of cross-sectional disagreement among synthetic agents. Across 293 Governing Council events from 1998 to 2026, this measure correlates at approximately 0.5 with realized Overnight Index S...