News Sentiment and Cross-Country Fluctuations

摘要

What is the information content of news-based measures of sentiment? How are they related to aggregate economic fluctuations? I construct a sentiment index by measuring the net amount of positive expressions in the corpus of Economic news articles produced by Reuters over the period 1987 - 2013 and across 12 countries. The index successfully tracks fluctuations in Gross Domestic Product (GDP) at the country level, is a leading indicator of GDP growth and contains information to help forecast GDP growth which is not captured by professional forecasts. This suggests that forecasters do not appropriately incorporate available information in predicting future states of the economy.