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Assessment of inflationary pressures using newspaper text analysis

Author

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  • Mirko Ðukic

    (National Bank of Serbia)

Abstract

In this paper we present the results of a dictionary-based text analysis of articles from the economic sections of four Serbian daily newspapers, caried out to estimate if those articles contain useful information for assessing inflationary pressures. We analyzed 117,113 economic articles in total for the period 2007–2022, by counting terms related to inflation and price rises and price falls, or counting texts containing those terms. Measures of newspaper inflation sentiment, obtained in this way, were found to be highly correlated with inflation, mainly driven by the periods of large inflation swings. During the period of stable inflation, the correlation is significantly lower. Causal relationship clearly goes from the newspaper inflation sentiment to inflation, and simple inflation models with the sentiment as an explanatory variable beat benchmark AR model in the out-ofsample forecast. We conclude that newspaper inflation sentiment can be used as an indicator of inflationary pressures, especially during periods of high inflation volatility.

Suggested Citation

  • Mirko Ðukic, 2022. "Assessment of inflationary pressures using newspaper text analysis," Working Papers Bulletin 12, National Bank of Serbia.
    • Handle: RePEc:nsb:bilten:12
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    References listed on IDEAS

    as
    1. 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.
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    3. Dräger, Lena & Lamla, Michael J., 2012. "Updating inflation expectations: Evidence from micro-data," Economics Letters, Elsevier, vol. 117(3), pages 807-810.
    4. David O. Lucca & Francesco Trebbi, 2009. "Measuring Central Bank Communication: An Automated Approach with Application to FOMC Statements," NBER Working Papers 15367, National Bureau of Economic Research, Inc.
    5. Rambaccussing, Dooruj & Kwiatkowski, Andrzej, 2020. "Forecasting with news sentiment: Evidence with UK newspapers," International Journal of Forecasting, Elsevier, vol. 36(4), pages 1501-1516.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    inflation forecasting; text analysis;

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C55 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Large Data Sets: Modeling and Analysis
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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