THE IMPACTS OF SPEECHES ON NOWCASTING GDP: A CASE STUDY ON EURO AREA MARKETS

Necmettin Alpay Kocak
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Necmettin Alpay Kocak: Department of Economics and Administrative Sciences, Hacettepe University, Ankara, Turkey

Studii Financiare (Financial Studies), 2021, vol. 25, issue 1, 6-29

Abstract: The use of speech data in nowcasting models is a new topic while the use of sentiment and emotion indicators from microblogs and internet platforms in nowcasting models has been discussed in the literature. The effect of the speech data of European Central Bank’s (ECB) officials on nowcasting Euro Area GDP is investigated in this paper. After performing a detailed descriptive analysis of the speech data, five emotion indicators are obtained as a result of the emotion analysis. The contribution of these emotion indicators is examined to a nowcasting model including indicators from the real sector and household/business surveys related to the Euro Area for the period of 1995:01-2019:12. The effects of emotion indicators on model are analysed root mean squared error (RMSE), impulse-response functions, variance decomposition analysis and revision analysis. Findings show that emotion indicators provide a decrease in RMSE of nowcasting model. It is found out that the shocks in the emotion indicators are significant on the GDP in the long term, and the emotion indicators are effective in explaining the variance of the forecast error variance of GDP. Revision analysis indicates that emotion indicators do not increase the revision of GDP nowcasts. As a result, it can be claimed that the emotion indicators obtained from the speeches of ECB officials have a noticeable effect on the nowcasting the Euro Area GDP.

Keywords: Emotion analysis; ECB speeches; Nowcasting; Euro Area (search for similar items in EconPapers)
JEL-codes: C33 E52 E58 (search for similar items in EconPapers)
Date: 2021
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