TY - JOUR

T1 - Media reporting and business cycles

T2 - empirical evidence based on news data

AU - Lamla, Michael J.

AU - Lein, Sarah M.

AU - Sturm, Jan Egbert

PY - 2020/9/1

Y1 - 2020/9/1

N2 - 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 firms in the German manufacturing sector. We find that innovations in news reporting affect business expectations, even when conditioning on the current business situation and industrial production. The dynamics of the empirical model confirm theoretical predictions that news innovations affect real variables such as production via changes in expectations. Looking at individual sectors within manufacturing, we find that macroeconomic news is at least as important for business expectations as sector-specific news. This is consistent with the existence of information complementarities across sectors.

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

KW - Economics

KW - Media reporting

KW - News-driven business cycles

KW - Sectoral information complementarities

UR - http://www.scopus.com/inward/record.url?scp=85066091304&partnerID=8YFLogxK

U2 - 10.1007/s00181-019-01713-5

DO - 10.1007/s00181-019-01713-5

M3 - Journal articles

AN - SCOPUS:85066091304

VL - 59

SP - 1085

EP - 1105

JO - Empirical Economics

JF - Empirical Economics

SN - 0377-7332

IS - 3

ER -