Nowcasting GDP using tone-adjusted time varying news topics: Evidence from the financial press

47 Pages Posted: 8 Mar 2023

See all articles by Dorinth van Dijk

Dorinth van Dijk

De Nederlandsche Bank; Massachusetts Institute of Technology (MIT)

Jasper de Winter

De Nederlandsche Bank

Date Written: February 17, 2023

Abstract

We extract tone-adjusted, time-varying and hierarchically ordered topics from a large corpus of Dutch financial news and investigate whether these topics are useful for monitoring the business cycle and nowcasting GDP growth in the Netherlands. The financial newspaper articles span the period January 1985 up until January 2021. Our newspaper sentiment indicator has a high concordance with the business cycle. Further, we find newspaper sentiment increases the accuracy of our nowcast for GDP growth using a dynamic factor model, especially in periods of crisis. We conclude that our tone-adjusted newspapertopics contain valuable information not embodied in monthly indicators from statisticaloffices.

Keywords: Factor models, topic modeling, nowcasting[comma separated]

JEL Classification: C8, C38, C55, E3

Suggested Citation

van Dijk, Dorinth and de Winter, Jasper, Nowcasting GDP using tone-adjusted time varying news topics: Evidence from the financial press (February 17, 2023). De Nederlandsche Bank Working Paper No. 766, Available at SSRN: https://ssrn.com/abstract=4382028 or http://dx.doi.org/10.2139/ssrn.4382028

Dorinth Van Dijk (Contact Author)

De Nederlandsche Bank ( email )

PO Box 98
1000 AB Amsterdam
Amsterdam, 1000 AB
Netherlands

Massachusetts Institute of Technology (MIT) ( email )

77 Massachusetts Avenue
50 Memorial Drive
Cambridge, MA 02139-4307
United States

Jasper de Winter

De Nederlandsche Bank ( email )

PO Box 98
1000 AB Amsterdam
Amsterdam, 1000 AB
Netherlands

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