IDEAS home Printed from https://ideas.repec.org/p/bfr/banfra/921.html
   My bibliography  Save this paper

Using the Press to Construct a New Indicator of Inflation Perceptions in France

Author

Listed:
  • Olivier De Bandt
  • Jean-Charles Bricongne
  • Julien Denes
  • Alexandre Dhenin
  • Annabelle De Gaye
  • Pierre-Antoine Robert

Abstract

The paper applies Natural Language Processing techniques (NLP) to the quasi-universe of newspaper articles for France, concentrating on the period 2004-2022, in order to measure inflation attention as well as perceptions by households and firms for that country. The indicator, constructed along the lines of a balance of opinions, is well correlated with actual HICP inflation. It also exhibits good forecasting properties for the European Commission survey on households’ inflation expectations, as well as overall HICP inflation. The method used is a supervised approach that we describe step-by-step. It performs better on our data than the Latent-Dirichlet-Allocation (LDA)-based approach of Angelico et al. (2022). The indicator can be used as an early real-time indicator of future inflation developments and expectations. It also provides a new set of indicators at a time when central banks monitor inflation through new types of surveys of households and firms.

Suggested Citation

  • Olivier De Bandt & Jean-Charles Bricongne & Julien Denes & Alexandre Dhenin & Annabelle De Gaye & Pierre-Antoine Robert, 2023. "Using the Press to Construct a New Indicator of Inflation Perceptions in France," Working papers 921, Banque de France.
    • Handle: RePEc:bfr:banfra:921
    as

    Download full text from publisher

    File URL: https://publications.banque-france.fr/sites/default/files/medias/documents/wp921.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Lena Dräger, 2015. "Inflation perceptions and expectations in Sweden – Are media reports the missing link?," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 77(5), pages 681-700, October.
    2. Michael Ehrmann & Damjan Pfajfar & Emiliano Santoro, 2017. "Consumers' Attitudes and Their Inflation Expectations," International Journal of Central Banking, International Journal of Central Banking, vol. 13(1), pages 225-259, February.
    3. Gali, Jordi & Gertler, Mark, 1999. "Inflation dynamics: A structural econometric analysis," Journal of Monetary Economics, Elsevier, vol. 44(2), pages 195-222, October.
    4. Leif Anders Thorsrud, 2016. "Nowcasting using news topics Big Data versus big bank," Working Papers No 6/2016, Centre for Applied Macro- and Petroleum economics (CAMP), BI Norwegian Business School.
    5. Eleni Kalamara & Arthur Turrell & Chris Redl & George Kapetanios & Sujit Kapadia, 2022. "Making text count: Economic forecasting using newspaper text," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 37(5), pages 896-919, August.
    6. Damjan Pfajfar & Emiliano Santoro, 2013. "News on Inflation and the Epidemiology of Inflation Expectations," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 45(6), pages 1045-1067, September.
    7. Kristin J. Forbes, 2019. "Inflation Dynamics: Dead, Dormant, or Determined Abroad?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 50(2 (Fall)), pages 257-338.
    8. Menz, Jan-Oliver & Poppitz, Philipp, 2013. "Household`s Disagreement on Inflation Expectations and Socioeconomic Media Exposure in Germany," VfS Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 80006, Verein für Socialpolitik / German Economic Association.
    9. Jon Ellingsen & Vegard H. Larsen & Leif Anders Thorsrud, 2022. "News media versus FRED‐MD for macroeconomic forecasting," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 37(1), pages 63-81, January.
    10. Aprigliano, Valentina & Emiliozzi, Simone & Guaitoli, Gabriele & Luciani, Andrea & Marcucci, Juri & Monteforte, Libero, 2023. "The power of text-based indicators in forecasting Italian economic activity," International Journal of Forecasting, Elsevier, vol. 39(2), pages 791-808.
    11. Marta Bañbura & Danilo Leiva-León & Jan-Oliver Menz, 2021. "Do inflation expectations improve model-based inflation Forecasts?," Working Papers 2138, Banco de España.
    12. Leif Anders Thorsrud, 2020. "Words are the New Numbers: A Newsy Coincident Index of the Business Cycle," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 38(2), pages 393-409, April.
    13. Picault, Matthieu & Pinter, Julien & Renault, Thomas, 2022. "Media sentiment on monetary policy: Determinants and relevance for inflation expectations," Journal of International Money and Finance, Elsevier, vol. 124(C).
    14. Christopher D. Carroll, 2003. "Macroeconomic Expectations of Households and Professional Forecasters," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 118(1), pages 269-298.
    15. McLaren, Nick & Shanbhogue, Rachana, 2011. "Using internet search data as economic indicators," Bank of England Quarterly Bulletin, Bank of England, vol. 51(2), pages 134-140.
    16. 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).
    17. Candia, Bernardo & Coibion, Olivier & Gorodnichenko, Yuriy, 2024. "The inflation expectations of U.S. firms: Evidence from a new survey," Journal of Monetary Economics, Elsevier, vol. 145(S).
    18. Olivier Coibion & Yuriy Gorodnichenko & Michael Weber, 2022. "Monetary Policy Communications and Their Effects on Household Inflation Expectations," Journal of Political Economy, University of Chicago Press, vol. 130(6), pages 1537-1584.
    19. Angelico, Cristina & Marcucci, Juri & Miccoli, Marcello & Quarta, Filippo, 2022. "Can we measure inflation expectations using Twitter?," Journal of Econometrics, Elsevier, vol. 228(2), pages 259-277.
    20. Frédérique Savignac & Erwan Gautier & Yuriy Gorodnichenko & Olivier Coibion, 2024. "Firms’ Inflation Expectations: New Evidence from France," Journal of the European Economic Association, European Economic Association, vol. 22(6), pages 2748-2781.
    21. Galí, Jordi & Gertler, Mark, 1999. "Inflation Dynamics: A Structural Economic Analysis," CEPR Discussion Papers 2246, C.E.P.R. Discussion Papers.
    22. Benjamin Beckers & Konstantin A. Kholodilin & Dirk Ulbricht, 2017. "Reading between the Lines: Using Media to Improve German Inflation Forecasts," Discussion Papers of DIW Berlin 1665, DIW Berlin, German Institute for Economic Research.
    23. Jouchi Nakajima & Hiroaki Yamagata & Tatsushi Okuda & Shinnosuke Katsuki & Takeshi Shinohara, 2021. "Extracting Firms' Short-Term Inflation Expectations from the Economy Watchers Survey Using Text Analysis," Bank of Japan Working Paper Series 21-E-12, Bank of Japan.
    24. Castelletti-Font Barbara, & Gautier Erwan, & Ulgazi Youssef, & Vertier Paul., 2021. "Inflation in France during the lockdowns [L’inflation en France durant les confinements]," Bulletin de la Banque de France, Banque de France, issue 234.
    25. Adam Hale Shapiro & Daniel J Wilson, 2022. "Taking the Fed at its Word: A New Approach to Estimating Central Bank Objectives using Text Analysis," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 89(5), pages 2768-2805.
    26. Rambaccussing, Dooruj & Kwiatkowski, Andrzej, 2020. "Forecasting with news sentiment: Evidence with UK newspapers," International Journal of Forecasting, Elsevier, vol. 36(4), pages 1501-1516.
    27. Taeyoung Doh & Dongho Song & Shu-Kuei X. Yang, 2020. "Deciphering Federal Reserve Communication via Text Analysis of Alternative FOMC Statements," Research Working Paper RWP 20-14, Federal Reserve Bank of Kansas City.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Jean-Charles Bricongne & Baptiste Meunier & Raquel Caldeira, 2024. "Should Central Banks Care About Text Mining? A Literature Review," Working papers 950, Banque de France.
    2. Chee-Hong Law & Kim Huat Goh, 2024. "A systematic literature review of the implications of media on inflation expectations," International Economics and Economic Policy, Springer, vol. 21(2), pages 311-340, May.
    3. Larsen, Vegard H. & Thorsrud, Leif Anders & Zhulanova, Julia, 2021. "News-driven inflation expectations and information rigidities," Journal of Monetary Economics, Elsevier, vol. 117(C), pages 507-520.
    4. Berge, Travis J., 2018. "Understanding survey-based inflation expectations," International Journal of Forecasting, Elsevier, vol. 34(4), pages 788-801.
    5. Coibion, Olivier & Gorodnichenko, Yuriy & Kumar, Saten & Pedemonte, Mathieu, 2020. "Inflation expectations as a policy tool?," Journal of International Economics, Elsevier, vol. 124(C).
    6. Caruso-Bloeck, Martin & Mello, Miguel & Ponce, Jorge, 2023. "News of disinflation and firms’ expectations: New causal evidence," Journal of International Money and Finance, Elsevier, vol. 137(C).
    7. Ángelo Gutiérrez-Daza, 2024. "Business Cycles when Consumers Learn by Shopping," Working Papers 2024-12, Banco de México.
    8. Tsiaplias, Sarantis, 2020. "Time-Varying Consumer Disagreement and Future Inflation," Journal of Economic Dynamics and Control, Elsevier, vol. 116(C).
    9. Xu, Yingying & Chang, Hsu-Ling & Lobonţ, Oana-Ramona & Su, Chi-Wei, 2016. "Modeling heterogeneous inflation expectations: empirical evidence from demographic data?," Economic Modelling, Elsevier, vol. 57(C), pages 153-163.
    10. Perico Ortiz, Daniel, 2023. "Inflation news coverage, expectations and risk premium," FAU Discussion Papers in Economics 05/2023, Friedrich-Alexander University Erlangen-Nuremberg, Institute for Economics.
    11. Alan S. Blinder & Michael Ehrmann & Jakob de Haan & David-Jan Jansen, 2024. "Central Bank Communication with the General Public: Promise or False Hope?," Journal of Economic Literature, American Economic Association, vol. 62(2), pages 425-457, June.
    12. Link, Sebastian & Peichl, Andreas & Roth, Christopher & Wohlfart, Johannes, 2023. "Information frictions among firms and households," Journal of Monetary Economics, Elsevier, vol. 135(C), pages 99-115.
    13. Pooja Kapoor & Sujata Kar, 2023. "A review of inflation expectations and perceptions research in the past four decades: a bibliometric analysis," International Economics and Economic Policy, Springer, vol. 20(2), pages 279-302, May.
    14. Lena Dräger & Michael J. Lamla, 2024. "Consumers' macroeconomic expectations," Journal of Economic Surveys, Wiley Blackwell, vol. 38(2), pages 427-451, April.
    15. Sheen, Jeffrey & Wang, Ben Zhe, 2023. "Do monetary condition news at the zero lower bound influence households’ expectations and readiness to spend?," European Economic Review, Elsevier, vol. 152(C).
    16. Dietrich, Alexander M. & Kuester, Keith & Müller, Gernot J. & Schoenle, Raphael, 2022. "News and uncertainty about COVID-19: Survey evidence and short-run economic impact," Journal of Monetary Economics, Elsevier, vol. 129(S), pages 35-51.
    17. David-Jan Jansen & Matthias Neuenkirch, 2017. "News Consumption, Political Preferences, and Accurate Views on Inflation," Research Papers in Economics 2017-03, University of Trier, Department of Economics.
    18. Dorinth van Dijk & Jasper de Winter, 2023. "Nowcasting GDP using tone-adjusted time varying news topics: Evidence from the financial press," Working Papers 766, DNB.
    19. Arndt, Sarah, 2024. "Different Newspapers – Different Inflation Perceptions," Working Papers 0748, University of Heidelberg, Department of Economics.
    20. Alexander Doser & Ricardo Nunes & Nikhil Rao & Viacheslav Sheremirov, 2023. "Inflation expectations and nonlinearities in the Phillips curve," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 38(4), pages 453-471, June.

    More about this item

    Keywords

    Inflation; Natural Language Processing; Households and Firms; Expectations; Machine Learning;
    All these keywords.

    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • C55 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Large Data Sets: Modeling and Analysis
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bfr:banfra:921. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Michael brassart (email available below). General contact details of provider: https://edirc.repec.org/data/bdfgvfr.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.