Predictions about short-term economic growth can become a lot more accurate by measuring sentiment based on newspaper reports, according to research by De Nederlandsche Bank (DNB). Central bank researchers looked at about 1 million newspaper articles for the new indicator The Financial Times (FD) from the past decades.
DNB paid particular attention to positive and negative words in the messages. In this way, according to the researchers, it is possible to determine the sentiment. And that, they say, can be put to good use in predicting economic growth.
Economic estimates almost always contain a so-called prediction error. But with the help of such a sentiment indicator, the deviations can be reduced by about 10 to 15 percent, the researchers say. It also emerged that the decline in economic growth in the run-up to the financial crisis of 2008-2009 had already started in 2007 due to the sentiment indicator. The corona crisis could also be picked up on time.
To the FD let the researchers know that the results correspond with the results of earlier foreign research. “Newspaper reports are a relevant source for monitoring and forecasting the economy.”
Source site www.nu.nl