The Economy, the News, and the Public: A Longitudinal Study of the Impact of Economic News on Economic Evaluations and Expectations

Abstract

This article studies the tripartite relationship between the economy, economic news, and public economic perceptions. Our analysis is twofold: We investigate the impact of the real economy on economic news in Dutch newspapers (2002-2015, N = 127,120); second, we analyze the impact of economic news on public economic perceptions. Our empirical approach builds on and contributes to the literature by making nuanced distinctions between (a) economic levels and changes (positive/negative), (b) volume and tone of coverage (positive/negative), and, most importantly, (c) people’s retrospective and prospective economic judgments. Our analyses show that the public is presented a version of economic reality that is skewed to the negative, which strongly affects people’s economic expectations but not evaluations. Extending media-dependency theory, these results demonstrate the necessity to both conceptually and empirically distinguish between people’s retrospective and prospective judgments.

What’s the Tone? Easy Doesn’t Do It: Analyzing Performance and Agreement Between Off-the-Shelf Sentiment Analysis Tools

“…One study, for example, counted the number of articles that referred to at least one of the multiple negative economic developments (i.e., recession, economic crisis, shrinking economy, economic down turn or fall) (Hollanders & Vliegenthart, 2011). Expanding the list of words that Kleinnijenhuis, Schultz, Oegema, and Van Atteveldt (2013) used to analyze business news about financial institutions, Damstra and Boukes (2018) used a tailor-made list of 65 words particularly focusing on the sentiment within economic news. Thereby, their operationalization distinguished between hope-related words (e.g., hope, confidence, enthusiasm, inspiration, relief, rescue, and recovery) and fear-related words (e.g., fear, shock, panic, danger, worry, stress, tension, and anxiety).…”

“…Thereby, their operationalization distinguished between hope-related words (e.g., hope, confidence, enthusiasm, inspiration, relief, rescue, and recovery) and fear-related words (e.g., fear, shock, panic, danger, worry, stress, tension, and anxiety). 2 Including words as these (e.g., emotions, mental states) rather than specific economic terms in their dictionary, Damstra and Boukes (2018) captured the general sentiment in economic news rather than the presence of negative economic terms that may be negated in the text (e.g., "the recession is finally over").…”

“…Pattern and Polyglot are both available as Python packages, and both do their own tokenization. A custom script was implemented to calculate scores based on the tailor-made approach of Damstra and Boukes (2018; presence of 30 positive and 35 negative keywords). DANEW was implemented by binarizing word-sentiment scores based on above and below mean values and the score was calculated as the number of positive minus the number of negative scores (similar to Damstra & Boukes' specification).…”

“…Whereas the simple approach of only searching for "recession" performed badly overall (i.e., negative α-values), it is interesting to see that the tailor-made dictionary of Damstra and Boukes (2018) performs slightly better for the full text (α = .25). Albeit 0.10-points less than LIWC, it follows Polyglot very closely (α = .26) and has a considerably higher α-score than the other three off-the-shelf tools.…”

The economy. How do the media cover it and what are the effects? A literature review

“…Exposure to economic news positively affects people's knowledge of this topic, especially for those citizens with few -negative-real-life economic experiences and those who have no alternative sources of information such as interpersonal communication (Kalogeropoulos, Albaek, De Vreese, & Van Dalen, 2015). An extensive base of empirical research shows how economic news is key to citizens' perceptions of the economy (e.g., Behr & Iyengar, 1985;Blood & Phillips, 1997;Damstra & Boukes, 2018;De Boef & Kellstedt, 2004;Doms & Morin, 2004;Goidel, Procopio, Terrell, & Wu, 2010;Hetherington, 1996;Soroka, 2014;Soroka et al, 2015;Van Dalen et al, 2016;Wu et al, 2002), while a small subset of studies report no or minimal effects (e.g., Haller & Norpoth, 1997;Hopkins, Kim, & Kim, 2017;Lischka, 2016;Wu, McCracken, & Saito, 2004).…”