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'Whatever it Takes' to Change Belief: Evidence from Twitter

Author

Listed:
  • Michael Stiefel

    (UZH - Universität Zürich [Zürich] = University of Zurich)

  • Rémi Vivès

    (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique)

Abstract

The sovereign debt literature emphasizes the possibility of avoiding a self-fulfilling default crisis if markets anticipate the central bank to act as lender of last resort. This paper investigates the extent to which changes in belief about an intervention of the European Central Bank (ECB) explain the sudden reduction of government bond spreads for the distressed countries in summer 2012. We study Twitter data and extract belief using machine learning techniques. We find evidence of strong increases in the perceived likelihood of ECB intervention and show that those increases explain subsequent decreases in the bond spreads of the distressed countries.

Suggested Citation

  • Michael Stiefel & Rémi Vivès, 2019. "'Whatever it Takes' to Change Belief: Evidence from Twitter," Working Papers halshs-02053429, HAL.
    • Handle: RePEc:hal:wpaper:halshs-02053429
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-02053429v2
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    References listed on IDEAS

    as
    1. Roch, Francisco & Uhlig, Harald, 2018. "The dynamics of sovereign debt crises and bailouts," Journal of International Economics, Elsevier, vol. 114(C), pages 1-13.
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    Cited by:

    1. Ehrmann, Michael & Wabitsch, Alena, 2022. "Central bank communication with non-experts – A road to nowhere?," Journal of Monetary Economics, Elsevier, vol. 127(C), pages 69-85.

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    More about this item

    Keywords

    self-fulfilling default crisis; unconventional monetary policy; Twitter data;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems

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