Media reporting and business cycles: empirical evidence based on news data

Recent literature suggests that news shocks could be an important driver of economic cycles. In this article, we use a direct measure of news sentiment derived from media reports. This allows us to examine whether innovations in the reporting tone correlate with changes in the assessment and expecta...

Full description

Saved in:
Bibliographic Details
Published in:Empirical economics 2020-09, Vol.59 (3), p.1085-1105
Main Authors: Lamla, Michael J., Lein, Sarah M., Sturm, Jan-Egbert
Format: Article
Language:English
Subjects:
Business cycles
Conditioning
Econometrics
Economic models
Economic theory
Economic Theory/Quantitative Economics/Mathematical Methods
Economics
Economics and Finance
Finance
Industrial production
Innovations
Insurance
Management
Manufacturing
News
Statistics for Business
Citations: Items that this one cites
Items that cite this one
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:Recent literature suggests that news shocks could be an important driver of economic cycles. In this article, we use a direct measure of news sentiment derived from media reports. This allows us to examine whether innovations in the reporting tone correlate with changes in the assessment and expectations of the business situation as reported by firms in the German manufacturing sector. We find that innovations in news reporting affect business expectations, even when conditioning on the current business situation and industrial production. The dynamics of the empirical model confirm theoretical predictions that news innovations affect real variables such as production via changes in expectations. Looking at individual sectors within manufacturing, we find that macroeconomic news is at least as important for business expectations as sector-specific news. This is consistent with the existence of information complementarities across sectors.
ISSN:0377-7332
1435-8921
DOI:10.1007/s00181-019-01713-5