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

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  • Lamla, Michael J.
  • Lein, Sarah M.

    (University of Basel)

  • Sturm, Jan-Egbert

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

Suggested Citation

  • Lamla, Michael J. & Lein, Sarah M. & Sturm, Jan-Egbert, 2019. "Media Reporting and Business Cycles: Empirical Evidence based on News Data," Working papers 2019/05, Faculty of Business and Economics - University of Basel.
    • Handle: RePEc:bsl:wpaper:2019/05
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    Cited by:

    1. Kristoffer Persson, 2020. "Economic Reality, Economic Media and Individuals' Expectations," Papers 2007.13823, arXiv.org.
    2. Müller, Henrik & Schmidt, Tobias & Rieger, Jonas & Hufnagel, Lena Marie & Hornig, Nico, 2022. "A German inflation narrative. How the media frame price dynamics: Results from a RollingLDA analysis," DoCMA Working Papers 9, TU Dortmund University, Dortmund Center for Data-based Media Analysis (DoCMA).
    3. Naumer, Hans-Jörg, 2023. "TV media sentiment, mutual fund flows and portfolio choice: They do not put their money where their sentiment is," Research in International Business and Finance, Elsevier, vol. 66(C).
    4. Maria do Rosário Anjos, 2021. "Free Competition and Fiscal Policy in European Union," Journal of International Business Research and Marketing, Inovatus Services Ltd., vol. 6(6), pages 25-30, September.
    5. Karsten Müller, 2022. "German forecasters’ narratives: How informative are German business cycle forecast reports?," Empirical Economics, Springer, vol. 62(5), pages 2373-2415, May.
    6. Dorine Boumans & Henrik Müller & Stefan Sauer, 2022. "How Media Content Influences Economic Expectations: Evidence from a Global Expert Survey," ifo Working Paper Series 380, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    7. Dooruj Rambaccussing & Andrzej Kwiatkowski, 2024. "The nexus between national and regional reporting of economic news: Evidence from the United Kingdom and Scotland," Bulletin of Economic Research, Wiley Blackwell, vol. 76(2), pages 371-393, April.
    8. Maria do Rosário Anjos, 2020. "Free Competition and Fiscal Policy in European Union," International Journal of Operations Management, Inovatus Services Ltd., vol. 1(1), pages 49-56, October.

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    More about this item

    Keywords

    Media reporting; news-driven business cycles; sectoral information complementarities;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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