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“Whatever it Takes” to Change Belief: Evidence from Twitter

Michael Stiefel () and Rémi Vivès
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Michael Stiefel: Department of Economics, University of Zurich

No 1907, AMSE Working Papers from Aix-Marseille School of Economics, France

Abstract: The sovereign debt literature emphasizes the possibility of avoiding a self-fulfilling default crisis if markets anticipate the central bank to act as lender of last resort. This paper investigates the extent to which changes in belief about an intervention of the European Central Bank (ECB) explain the sudden reduction of government bond spreads for the distressed countries in summer 2012. We study Twitter data and extract belief using machine learning techniques. We find evidence of strong increases in the perceived likelihood of ECB intervention and show that those increases explain subsequent decreases in the bond spreads of the distressed countries.

Keywords: self-fulfilling default crisis; unconventional monetary policy; Twitter data (search for similar items in EconPapers)
JEL-codes: D83 E44 E58 F34 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2019-02, Revised 2019-03
New Economics Papers: this item is included in nep-big, nep-cba, nep-cmp, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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