News implied volatility and aggregate economic activity: evidence from the Japanese government bond market

Keiichi Goshima, Hiroshi Ishijima and Mototsugu Shintani

Applied Economics Letters, 2024, vol. 31, issue 6, 568-573

Abstract: Because options on 10-year Japanese government bond (JGB) futures are relatively new in the market, their implied volatility, JGB-VIX, is not available before 2007. For the period when JGB-VIX is available, we conduct supervised learning by using the daily newspaper articles as input and JGB-VIX as output. We then construct a new JGB market uncertainty measure, which we called JGB-NU, based on the predicted values of JGB-VIX from the estimated model and contents of the newspaper articles from 1981 to 2021. In the VAR analysis with JGB-NU, we confirm that JGB market uncertainty shocks have a negative impact on real economic activities in Japan.

Date: 2024
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DOI: 10.1080/13504851.2022.2140751

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