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Do Media Data Help to Predict German Industrial Production?
Author(s) -
Ulbricht Dirk,
Kholodilin Konstantin A.,
Thomas Tobias
Publication year - 2017
Publication title -
journal of forecasting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.543
H-Index - 59
eISSN - 1099-131X
pISSN - 0277-6693
DOI - 10.1002/for.2449
Subject(s) - german , industrial production , production (economics) , recession , econometrics , sample (material) , economics , economic indicator , lag , time horizon , industrial production index , computer science , macroeconomics , finance , history , computer network , chemistry , archaeology , chromatography
In an uncertain world, decisions by market participants are based on expectations. Therefore, sentiment indicators reflecting expectations have a proven track record at predicting economic variables. However, survey respondents largely perceive the world through media reports. Here, we want to make use of that. We employ a rich dataset provided by Media Tenor International, based on sentiment analysis of opinion‐leading media in Germany from 2001 to 2014, transformed into several monthly indices. German industrial production is predicted in a real‐time out‐of‐sample forecasting experiment and media indices are compared to a huge set of alternative indicators. Media data turn out to be valuable for 10‐ to 12‐month horizon forecasts, which is in line with the lag between monetary policy announcements and their effect on industrial production. This holds in the period during and after the Great Recession when many models fail. Copyright © 2016 John Wiley & Sons, Ltd.