Stress in the Press or Stress in the Market: A New Measure of Perceived Financial Stress

Brett Barnes, Thibaut Duprey and Fred Liu

No 2026-50, Staff Analytical Papers from Bank of Canada

Abstract: We develop a news-based measure of perceived financial stress for Canada using more than 900,000 business and economic news articles from 1977 to 2026. Using a data-driven keyword discovery algorithm, we construct an interpretable News-based Stress Index (NSI) that tracks major stress episodes and captures periods when concerns about financial risks intensify despite limited market disruption. Using linear and quantile-augmented VARs, we show that news shocks orthogonal to financial shocks primarily reduce unsecured consumer credit by shifting its entire distribution, whereas market-based financial shocks primarily worsen downside risks to both credit and real activity. This highlights perceived financial stress as a distinct transmission channel operating through household precautionary behavior.

Keywords: Financial system; Financial stability and systemic risk; Household and business credit; Models and tools; Econometric, statistical and computational methods (search for similar items in EconPapers)
JEL-codes: C C5 C55 C8 C82 E E4 E44 G G0 G01 (search for similar items in EconPapers)
Date: 2026-10
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Persistent link: https://EconPapers.repec.org/RePEc:bca:bocsap:26-50

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