Reading between the Lines: Using Media to Improve German Inflation Forecasts

Benjamin Beckers, Konstantin Kholodilin () and Dirk Ulbricht

No 1665, Discussion Papers of DIW Berlin from DIW Berlin, German Institute for Economic Research

Abstract: In this paper, we examine the predictive ability of automatic and expert-rated media sentiment indicators for German inflation. We find that sentiment indicators are competitive in providing inflation forecasts against a large set of common macroeconomic and financial predictors. Sophisticated linguistic sentiment algorithms and business cycle news rated by experts perform best and are superior to simple word-count indicators and autoregressive forecasts.

Keywords: Inflation prediction; media sentiment indicators; news reports; real-time forecasting (search for similar items in EconPapers)
JEL-codes: C53 E31 E37 (search for similar items in EconPapers)
Pages: 19 p.
Date: 2017
New Economics Papers: this item is included in nep-for, nep-mac and nep-mon
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Citations: View citations in EconPapers (3)

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