Media Sentiment on Monetary Policy: Determinants and Relevance for Inflation Expectations

41 Pages Posted: 23 Oct 2020 Last revised: 7 Mar 2022

See all articles by Julien Pinter

Julien Pinter

Charles University - Institute of Economic Studies

Matthieu Picault

University of Orleans - Laboratoire d'économie d'Orléans

Thomas Renault

Université Paris I Panthéon-Sorbonne - Centre d'Economie de la Sorbonne (CES)

Date Written: September 4, 2020

Abstract

We construct a new indicator to capture media sentiment about the European Central Bank monetary policy and its relevant environment by analyzing 25,000 articles from five major international newspapers. Using named entity recognition and part-of-speech tagging, we propose a methodology to dissociate the dissemination of the central bank's official communications from the media comments. The resulting -daily- index correlates with some -monthly- standard measures of economic sentiment but reveals idiosyncratic information on monetary policy. Analyzing the determinants of our index, we find that both press conference and inter-meeting communications of the president significantly affect media sentiment. We then show that, controlling for a large range of factors, daily changes in media sentiment have predictive power on financial markets’ inflation expectations.

Keywords: central bank communication, European Central Bank, textual analysis, inflation expectations, media sentiment

JEL Classification: E43, E52, G12

Suggested Citation

Pinter, Julien and Picault, Matthieu and Renault, Thomas, Media Sentiment on Monetary Policy: Determinants and Relevance for Inflation Expectations (September 4, 2020). Available at SSRN: https://ssrn.com/abstract=3686904 or http://dx.doi.org/10.2139/ssrn.3686904

Julien Pinter (Contact Author)

Charles University - Institute of Economic Studies ( email )

Celetná 13
Praha 1, 116 36
Czech Republic

Matthieu Picault

University of Orleans - Laboratoire d'économie d'Orléans ( email )

Rue de Blois BP6739
Rue de Blois
Orléans cedex 2, Centre 45067
France

Thomas Renault

Université Paris I Panthéon-Sorbonne - Centre d'Economie de la Sorbonne (CES) ( email )

106-112 Boulevard de l'hopital
106-112 Boulevard de l'Hôpital
Paris Cedex 13, 75647
France

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