Can news help measure economic sentiment? An application in COVID-19 times

Abstract

for their comments and suggestions. We also thank all participants at the internal seminar of the Banco de España for their comments. The views expressed in this paper are our own and do not necessarily reflect the views of the Banco de España or the European System of Central Banks (ESCB).

New Data Sources for Central Banks

“…As an empirical exercise, we construct a text-based indicator that helps track economic activity, as described in [1]. It is based on a similar procedure that is used to elaborate the economic policy uncertainty indicator, i.e., it relies on counting the number of articles in the Spanish press that contain specific keywords.…”

“…Central banks make intensive use of structured databases to carry out their functions, whether in the banking supervision, financial stability, or monetary policy domains, to mention the core ones. 1 Some examples of individual data are firms' balance sheets (see, e.g., [51] or [6]), information relating to the volume of credit granted by financial institutions to individuals and firms, or the data relating to agents' financial decisions (see, e.g., [5]). In the area of macroeconomics, the main source of information tends to be the national accounts or the respective central bank sources, although a great deal of other information on the economic and financial situation is also published by other bodies: e.g., social security data, payroll employment data (Bureau of Labor Statistics), stock prices (Bloomberg), and house prices (real estate advertising web platforms).…”

“…In particular,(1) we require that each article also contains the name of the LA country of interest;(2) among the set of keywords related to policy, we include the name of the central bank and the name of the government's place of work in the country of interest. For more details, see[39].…”

“…The aim of the current exercise was to show the properties of our text-based indicator in the simplest framework possible 15. In[1], we compare this text-based indicator with the economic sentiment indicator (ESI) of the European Commission and show that, for Spain, the former significantly improves the GDP nowcast when compared with the ESI.…”

Empirical Evidence Regarding the Impact of Economic Growth and Inflation on Economic Sentiment and Household Consumption

“…Investor sentiment was studied also in connection with mass-media influences (Sun et al 2021). Aguilar et al (2021) proposed a novel newspaper-based sentiment indicator in order to monitor real-time changes within the Spanish economy. The results showed that the efficiency of the new indicator in forecasting GDP evolution was superior to that of the economic sentiment indicator measured by the European Commission.…”