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

Author

Listed:
  • Dorinth van Dijk
  • Jasper de Winter

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 fac- tor model, especially in periods of crisis. We conclude that our tone-adjusted newspaper topics contain valuable information not embodied in monthly indicators from statistical offices.

Suggested Citation

  • 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.
    • Handle: RePEc:dnb:dnbwpp:766
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    References listed on IDEAS

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    More about this item

    Keywords

    Factor models; topic modeling; nowcasting;
    All these keywords.

    JEL classification:

    • C8 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs
    • C38 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Classification Methdos; Cluster Analysis; Principal Components; Factor Analysis
    • C55 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Large Data Sets: Modeling and Analysis
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles

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