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).

Nowcasting Euro Area GDP with News Sentiment: A Tale of Two Crises

“…Similarly, Ardia et al (2019) and Rambaccussing and Kwiatkowski (2020), using US and UK newspaper text respectively, combine expert judgement and linear machine learning methods to forecast economic growth. Within the Euro area, Aguilar et al (2021) show that their sentiment indicator derived from Spanish newspapers is comparable to the sentiment index produced by the European Commission and more helpful in nowcasting GDP. Similarly, Aprigliano et al (2021) build sentiment and uncertainty indices for Italy and provide evidence of sizeable gains in forecast accuracy, both in normal and turbulent times, when forecasting several macroeconomic aggregates.…”

“…The uncertainty indices of Baker et al (2016) and the topic-based sentiment indicators of Thorsrud (2018) are prominent examples of how text can be useful for economic analysis. In a nowcasting and short-term forecasting context, studies such as Larsen and Thorsrud (2019); Kalamara et al (2020); Shapiro et al (2020); Aguilar et al (2021) show that text can significantly improve forecasts of key macroeconomic variables including GDP, inflation, and unemployment.…”

New developments in central bank statistics around the world1

“…Moreover, in addition to providing "hard" alternative data on relevant economic phenomena, digitalisation has also expanded the possibility of considering other types of indicators. This can be the case for "soft" factors, like indicators of confidence among economic agents, which can play an important role in shaping and predicting economic dynamics, even though they may not be on the "traditional" radar screen of statisticians [1]. For instance, Armas and Tuazon [2] have adopted this kind of approach to use freely available data on internet searches to assess investors' sentiment amid the pandemic and study the response of financial market prices to changes in risk attitudes.…”

Impact of Covid-19 on Cryptocurrencies: Evidence on Information Transmission Through Economic and Financial Market Sentiments

“…This ENS index has been utilized in a number of studies to test the impact of sentiment on risk and returns (Calomiris & Mamaysky, 2019) and economic activity (Benhabib & Spiegel, 2019). It has also been useful as a measure to capture sentiment at the onset of the global spread of COVID-19 (Aguilar, Ghirelli, Pacce, & Urtasun, 2020).…”