The Impact of Macroeconomic News Sentiment on Interest Rates
Type
working paper
Date Issued
2022-07-23
Author(s)
Abstract (De)
We propose news sentiment as a new explanatory variable for interest rates. Using articles related to interest rates, inflation, and the labor market we demonstrate the in-sample predictive power of sentiment on the short-rate applying the Taylor rule and a threshold autoregressive model. This predictive ability holds also after controlling for professionals' and consumers' expectations. Furthermore, we examine the dynamic interaction between sentiment and the yield curve using models from the Nelson-Siegel family. We find statistically significant effects of sentiment on yields and a contribution to out-of-sample forecast performance for different maturities.
Language
English
HSG Classification
contribution to scientific community
HSG Profile Area
SEPS - Quantitative Economic Methods
Pages
72
Eprints ID
268064