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

Lamla, Michael and Lein, Sarah and Sturm, Jan-Egbert (2020) 'Media Reporting and Business Cycles: Empirical Evidence based on News Data.' Empirical Economics, 59 (3). pp. 1085-1105. ISSN 0377-7332

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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 fi nd 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 con rm theoretical predictions that news innovations affect real variables such as production via changes in expectations. Looking at individual sectors within manufacturing, we fi nd that macroeconomic news is at least as important for business expectations as sector-spefici c news. This is consistent with the existence of information complementarities across sectors.

Item Type: Article
Uncontrolled Keywords: Media reporting; News-driven business cycles; Sectoral information complementarities
Subjects: H Social Sciences > HG Finance
Divisions: Faculty of Social Sciences
Faculty of Social Sciences > Essex Business School
SWORD Depositor: Elements
Depositing User: Elements
Date Deposited: 07 Jun 2019 12:48
Last Modified: 06 Jan 2022 14:00

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