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The Impacts Of Speeches On Nowcasting Gdp: A Case Study On Euro Area Markets

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  • KOCAK, Necmettin Alpay

    (Department of Economics and Administrative Sciences, Hacettepe University, Ankara, Turkey)

Abstract

The use of speech data in nowcasting models is a new topic while the use of sentiment and emotion indicators from microblogs and internet platforms in nowcasting models has been discussed in the literature. The effect of the speech data of European Central Bank’s (ECB) officials on nowcasting Euro Area GDP is investigated in this paper. After performing a detailed descriptive analysis of the speech data, five emotion indicators are obtained as a result of the emotion analysis. The contribution of these emotion indicators is examined to a nowcasting model including indicators from the real sector and household/business surveys related to the Euro Area for the period of 1995:01-2019:12. The effects of emotion indicators on model are analysed root mean squared error (RMSE), impulse-response functions, variance decomposition analysis and revision analysis. Findings show that emotion indicators provide a decrease in RMSE of nowcasting model. It is found out that the shocks in the emotion indicators are significant on the GDP in the long term, and the emotion indicators are effective in explaining the variance of the forecast error variance of GDP. Revision analysis indicates that emotion indicators do not increase the revision of GDP nowcasts. As a result, it can be claimed that the emotion indicators obtained from the speeches of ECB officials have a noticeable effect on the nowcasting the Euro Area GDP.

Suggested Citation

  • KOCAK, Necmettin Alpay, 2021. "The Impacts Of Speeches On Nowcasting Gdp: A Case Study On Euro Area Markets," Studii Financiare (Financial Studies), Centre of Financial and Monetary Research "Victor Slavescu", vol. 25(1), pages 6-29, March.
    • Handle: RePEc:vls:finstu:v:25:y:2021:i:1:p:6-29
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    References listed on IDEAS

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    More about this item

    Keywords

    Emotion analysis; ECB speeches; Nowcasting; Euro Area;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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