Search Results
Working Paper
Measuring Geopolitical Risk
We present a news-based measure of adverse geopolitical events and associated risks. The geopolitical risk (GPR) index spikes around the two world wars, at the beginning of the Korean War, during the Cuban Missile Crisis, and after 9/11. Higher geopolitical risk foreshadows lower investment and employment and is associated with higher disaster probability and larger downside risks. The adverse consequences of the GPR index are driven by both the threat and the realization of adverse geopolitical events. We complement our aggregate measures with industry- and firm-level indicators of ...
Working Paper
Measuring Shortages since 1900
This paper introduces a monthly shortage index spanning 1900 to the present, constructed from 25 million newspaper articles. The index captures shortages across industry, labor, food, and energy, and spikes during economic crises and wars. We validate the index and show that it provides information beyond traditional macroeconomic indicators. Using predictive regressions, we find that shortages are associated with persistently high inflation and lower economic activity. A structural VAR model reveals that, compared to a traditional supply shock, surprise movements in shortages produce less ...
Working Paper
Gauging the Sentiment of Federal Open Market Committee Communications through the Eyes of the Financial Press
We apply natural language processing tools to news articles in the financial press to construct a sentiment index—an index of the perceived semantic orientation of monetary policy communications around scheduled Federal Open Market Committee (FOMC) meetings. To that end, we develop several dictionaries that capture various monetary policy tools: conventional monetary policy, asset purchases, and forward guidance. The surprises in the sentiment index around FOMC meetings announcements explain variation in major asset prices classes between May 1999 and November 2022. Sentiment index ...
Working Paper
The Economic Effects of Trade Policy Uncertainty
We study the effects of unexpected changes in trade policy uncertainty (TPU) on the U.S. economy. We construct three measures of TPU based on newspaper coverage, firms' earnings conference calls, and aggregate data on tari rates. We document that increases in TPU reduce investment and activity using both firm-level and aggregate macroeconomic data. We interpret the empirical results through the lens of a two-country general equilibrium model with nominal rigidities and firms' export participation decisions. In the model as in the data, news and increased uncertainty about higher future ...
Working Paper
The FOMC versus the Staff: Do Policymakers Add Value in Their Tales?
Using close to 40 years of textual data from FOMC transcripts and the Federal Reserve staff's Greenbook/Tealbook, we extend Romer and Romer (2008) to test if the FOMC adds information relative to its staff forecasts not via its own quantitative forecasts but via its words. We use methods from natural language processing to extract from both types of document text-based forecasts that capture attentiveness to and sentiment about the macroeconomy. We test whether these text-based forecasts provide value-added in explaining the distribution of outcomes for GDP growth, the unemployment rate, and ...
Can Earnings Calls Be Used to Gauge Labor Market Tightness?
An index that uses textual analysis of earnings calls to track labor issues appears to be highly correlated to one measure of labor market tightness.
Discussion Paper
What Do Climate Risk Indices Measure?
As interest in understanding the economic impacts of climate change grows, the climate economics and finance literature has developed a number of indices to quantify climate risks. Various approaches have been employed, utilizing firm-level emissions data, financial market data (from equity and derivatives markets), or textual data. Focusing on the latter approach, we conduct descriptive analyses of six text-based climate risk indices from published or well-cited papers. In this blog post, we highlight the differences and commonalities across these indices.