  This research examines whether sentiments conveyed in the State Bank of
Pakistan's (SBP) communications impact financial market expectations and can
act as a monetary policy tool. To achieve our goal, we first use sentiment
analysis techniques to quantify the tone of SBP monetary policy documents and
second, we use short time window, high frequency methodology to approximate the
impact of tone on stock market returns. Our results show that positive
(negative) change in the tone positively (negatively) impacts stock returns in
Karachi Stock Exchange. Further extension shows that the communication of SBP
still has a statistically significant impact on stock returns when controlling
for different variables and monetary policy tool. Also, the communication of
SBP does not have a long term constant effect on stock market.
