Using Newspapers for Tracking the Business Cycle: A Comparative Study for Germany and Switzerland

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Abstract On the basis of keyword searches in newspaper articles several versions of the Recession-word Index (RWI) are constructed for Germany and Switzerland. We use these indices in order to track the business cycle dynamics in these two countries. Our main findings are the following. First, we show that augmenting benchmark autoregressive models with the RWI generally leads to improvement in accuracy of one-step ahead forecasts of GDP growth compared to those obtained by the benchmark model. Second, the accuracy of out-of-sample forecasts obtained with models augmented with the RWI is comparable to that of models augmented with established economic indicators in both countries, such as the Ifo Business Climate Index and the ZEW Indicator of Economic Sentiment for Germany, and the KOF Economic Barometer and the Purchasing Managers Index in manufacturing for Switzerland. Third, we show that the RWI-based forecasts are more accurate than the consensus forecasts (published by Consensus Economics Inc.) for Switzerland, whereas we reach the opposite conclusion for Germany. In fact, the accuracy of the consensus forecasts of GDP growth for Germany appears to be superior to that of any other indicator considered in our study. These results are robust to changes in estimation/forecast samples, the use of rolling vs expanding estimation windows, and the inclusion of a web-based recession indicator extracted from Google Trends into a set of the competing models. Terms of use: Documents in

Do Media Data Help to Predict German Industrial Production?

“…Grossarth‐Maticek and Mayr () find that the R‐word index is suitable for detecting turning points in the business cycle in real time. Iselin and Siliverstovs () find that media indicators are helpful for one‐quarter‐ahead forecasts. Partly, they are even better than other indicators.…”

“…Second, both studies consider only short‐term horizons. Grossarth‐Maticek and Mayr () focus on the first two lags (1 and 2 quarters), whereas Iselin and Siliverstovs () concentrate only on the one‐step‐ahead forecast. In contrast, we examine different horizons varying between 1 and 12 months ahead.…”

“…The results are rather mixed for both indices. Other media studies include Iselin and Siliverstovs (), who use the R‐word index to make one‐step‐ahead forecasts of the growth rates of real GDP in Germany and Switzerland. While media indicators are helpful for Switzerland, it is not the case for Germany.…”

Story beneath story: Do magazine articles reveal forthcoming returns on stock market?

“…Others have taken a tangent approach and endeavored to predict industrial production (Kholodilin et al, 2014) as well as track business cycle (Iselin and Siliverstovs, 2013) using media data. The former study was conducted in Germany and the latter was performed for both Germany and Switzerland.…”

Do Media Data Help to Predict German Industrial Production?

“…Their study uses media indices to predict German industrial production, contrasting the R-word index for Germany and a Media Tenor International index to predict growth rates of industrial production and of recession probabilities. Other media studies include Iselin and Siliverstovs (2013), who use the R-word index to forecast the growth rates of real GDP in Germany and Switzerland, and Ammann et al (2011), who computes the number of mentions of a lexicon of 236 words in the online archive of Handelsblatt with the aim of predicting yields of the German stock market DAX index.…”