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Media Reporting and Business Cycles: Empirical Evidence based on News Data

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  • Lamla, Michael J.
  • Lein, Sarah M.

    () (University of Basel)

  • Sturm, Jan-Egbert

Abstract

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 rms in the German manufacturing sector. We nd that innovations in news reporting aect business expectations, even when conditioning on the current business situation and industrial production. The dynamics of the empirical model conrm theoretical predictions that news innovations aect real variables such as production via changes in expectations. Looking at individual sectors within manufacturing, we nd that macroeconomic news is at least as important for business expectations as sector-specic news. This is consistent with the existence of information complementarities across sectors.

Suggested Citation

  • Lamla, Michael J. & Lein, Sarah M. & Sturm, Jan-Egbert, 2019. "Media Reporting and Business Cycles: Empirical Evidence based on News Data," Working papers 2019/05, Faculty of Business and Economics - University of Basel.
  • Handle: RePEc:bsl:wpaper:2019/05
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    References listed on IDEAS

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    More about this item

    Keywords

    Media reporting; news-driven business cycles; sectoral information complementarities;

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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