Words are the new numbers: A newsy coincident index of business cycles

Leif Thorsrud

No 2016/21, Working Paper from Norges Bank

Abstract: I construct a daily business cycle index based on quarterly GDP and textual information contained in a daily business newspaper. The newspaper data are decomposed into time series representing newspaper topics using a Latent Dirichlet Allocation model. The business cycle index is estimated using the newspaper topics and a time-varying Dynamic Factor Model where dynamic sparsity is enforced upon the factor loadings using a latent threshold mechanism. The resulting index is shown to be not only more timely but also more accurate than commonly used alternative business cycle indicators. Moreover, the derived index provides the index user with broad based high frequent information about the type of news that drive or reflect economic fluctuations.

Keywords: Business cycles; Dynamic Factor Model; Latent Dirichlet Allocation (LDA) (search for similar items in EconPapers)
JEL-codes: C11 C32 E32 (search for similar items in EconPapers)
Pages: 51 pages
Date: 2016-12-21
New Economics Papers: this item is included in nep-ecm, nep-fdg and nep-mac
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Citations: View citations in EconPapers (11)

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http://www.norges-bank.no/en/Published/Papers/Working-Papers/2016/212016/

Related works:
Journal Article: Words are the New Numbers: A Newsy Coincident Index of the Business Cycle (2020)
Working Paper: Words are the new numbers: A newsy coincident index of business cycles (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:bno:worpap:2016_21

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