Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/207096 
Year of Publication: 
2019
Series/Report no.: 
WWZ Working Paper No. 2019/05
Publisher: 
University of Basel, Center of Business and Economics (WWZ), Basel
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 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.
Subjects: 
media reporting
news-driven business cycles
sectoral information complementarities
JEL: 
E32
D82
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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