Research Feature - February 2023

Using Newspapers for Textual Indicators: Which and How Many?

Erik Andrés-Escayola, Corinna GhirelliOpens in new window, Luis MolinaOpens in new window, Javier J. PérezOpens in new window and Elena VidalOpens in new window

Abstract. This paper investigates the role that two key methodological choices play in the construction of textual indicators: the selection of local versus foreign newspapers and the breadth of the press coverage (i.e. the number of newspapers considered). The literature is almost silent about the robustness of the results with respect to these choices. We use as a case study the well-known economic policy uncertainty (EPU) index, taking as examples six Latin American countries and Spain. We develop EPU measures based on press with different levels of proximity, i.e. local versus foreign, and corroborate that they deliver broadly similar narratives and economic responses in a Bayesian vector autoregressive framework. Then, we show that constructing EPU indexes based on only one newspaper yields biased responses. This suggests that it is important to maximize the breadth of press coverage when building text-based indicators. That is, the larger the press coverage, the better. Click here File PDF: Opens in new window (143 KB).