A regime shift towards increased inflation expectations is credited with jumpstarting the recovery from the Great Depression in the United States. Germany experienced a recovery as fast and strong in the 1930s. What role did inflation expectations play at the start of this remarkable economic upturn? To answer this question, we study inflation expectations in Germany across two different methods: we conduct a narrative study of media sources and estimate inflation expectations from a FAVAR model. Consistently across these approaches, we do not find a shift to increased expected inflation. This recovery was different, and its causes lie elsewhere.
We study the extent to which events transmitted by the media affect Greek bond interest rates by analyzing qualitatively articles in global newspapers during the Greek debt crisis. We focus on dates with strong changes in the yield to maturity of Greek government bonds in order to test whether news coverage matters for financial markets. We relate our results to a quantitative measure of media coverage using the novel method of topic models and examine days with a high level of a quantitative topic series. News coverage seems to matter on the majority of dates. However, we also find dates without crucial events and media coverage but that have strong changes in the bond yield and that seem affected by sources other than the media. The quantitative news measure regularly reveals relevant news articles on the days we analyzed.
We study the role of global media during the Greek debt crisis and relate it to the transmission of events on financial actors’ expectations. To identify news coverage about the Greek debt crisis, we apply topic modeling to a newly compiled dataset of over 430,000 articles from The International New York Times and Financial Times from 2009 to 2015. We identify a Greek debt crisis topic and relate it to events concerning Greece during this time period. Our finding is that events are only relevant for financial markets when they are covered in the media, whereas events without media coverage have no effect. News coverage without immediate events is equally irrelevant for financial markets.
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