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The Impact of Newspapers on Consumer Confidence: Does Spin Bias Exist?

  • Karel-Jan Alsem
  • Steven Brakman
  • Lex Hoogduin
  • Gerard Kuper

Mullainathan and Shleifer (2002) argue that there are two types of media bias. One bias, called ideology, reflects a news outlet's desire to affect reader opinions in a particular direction. The second bias, referred to as spin, reflects the outlet's attempt to simply create a memorable story. Competition between outlets can eliminate the effect of ideologicalbias, but increases the incentive to spin stories. We examine whether spin exists in Dutch newspaper reporting on the state of the economy. If so, we assume that in their reports on the state of the economy newspapers exaggerate. Consumers reading such reports may be influenced by these reports. As a result, consumer confidence may be affected not only by economic fundamentals, but also by the way they are reported. We construct a variable that reflects the way consumers perceive economic news reported in newspapers. We find that this variable indeed has a significant, but small, impact on consumer confidence, which is short- lived.

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Paper provided by Netherlands Central Bank, Research Department in its series DNB Working Papers with number 011.

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Date of creation: Oct 2004
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Handle: RePEc:dnb:dnbwpp:011
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Web page: http://www.dnb.nl/en/

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  1. Jansen, W. Jos & Nahuis, Niek J., 2003. "The stock market and consumer confidence: European evidence," Economics Letters, Elsevier, vol. 79(1), pages 89-98, April.
  2. Sydney C. Ludvigson, 2004. "Consumer Confidence and Consumer Spending," Journal of Economic Perspectives, American Economic Association, vol. 18(2), pages 29-50, Spring.
  3. Sendhil Mullainathan & Andrei Shleifer, 2002. "Media Bias," NBER Working Papers 9295, National Bureau of Economic Research, Inc.
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