#Econhist papers I (mostly) admire, Jan 2024

From newspapers to antitoxins, from Egypt minorities to solar eclipses, the 'American Way' to pre-Enlightenment war, and much more

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1. (Almost) 200 Years of News-Based Economic Sentiment

Authors: Jules van Binsbergen, Svetlana Bryzgalova, Mayukh Mukhopadhyay and Varun Sharma

Research question: The paper investigates how economic sentiment, measured through text analysis of 200 million pages from 13,000 U.S. local newspapers over 170 years, can predict economic indicators like GDP, consumption, and employment growth. It explores whether this news-based sentiment measure, which covers a more extensive time series and geographic scope than existing measures, provides valuable information about the business cycle and economic forecasting.

Main results: The study finds that their measure of economic sentiment successfully predicts GDP growth, consumption, and employment, both at national and state levels. This prediction holds even after accounting for other common economic predictors and monetary policy decisions. Interestingly, the research also uncovers a trend of increasing negativity in news coverage over the past 50 years, which is consistent across states and unrelated to actual economic conditions. This negativity bias in media reporting is identified as a separate phenomenon from economic reporting.

My takeaway: Sentiment analysis can be particularly beneficial for countries and regions with limited historical economic data, as it not only provides insights into overall economic trends but also allows for a more detailed, regional analysis of economic performance. By utilising local news sources for text analysis, regions can better understand and track local economic sentiments and conditions, which is crucial for targeted policy-making and regional economic planning.