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Stress in the Press or Stress in the Market: A New Measure of Perceived Financial Stress

Author

Listed:
  • Brett Barnes
  • Thibaut Duprey
  • Fred Liu

Abstract

We develop a news-based measure of perceived financial stress for Canada using more than 900,000 business and economic news articles from 1977 to 2026. Using a data-driven keyword discovery algorithm, we construct an interpretable News-based Stress Index (NSI) that tracks major stress episodes and captures periods when concerns about financial risks intensify despite limited market disruption. Using linear and quantile-augmented VARs, we show that news shocks orthogonal to financial shocks primarily reduce unsecured consumer credit by shifting its entire distribution, whereas market-based financial shocks primarily worsen downside risks to both credit and real activity. This highlights perceived financial stress as a distinct transmission channel operating through household precautionary behavior.

Suggested Citation

  • Brett Barnes & Thibaut Duprey & Fred Liu, 2026. "Stress in the Press or Stress in the Market: A New Measure of Perceived Financial Stress," Staff Analytical Papers 2026-50, Bank of Canada.
    • Handle: RePEc:bca:bocsap:26-50
    DOI: 10.34989/sap-2026-50
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    JEL classification:

    • C - Mathematical and Quantitative Methods
    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • C55 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Large Data Sets: Modeling and Analysis
    • C8 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs
    • C82 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Macroeconomic Data; Data Access
    • E - Macroeconomics and Monetary Economics
    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G - Financial Economics
    • G0 - Financial Economics - - General
    • G01 - Financial Economics - - General - - - Financial Crises

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