Title: Narrative fragmentation and the business cycle
Authors: Isaiah Hull - Sveriges Riksbank (Sweden) [presenting]
Xin Zhang - Sveriges Riksbank (Sweden)
Christoph Bertsch - Sveriges Riksbank (Sweden)
Abstract: According to previous work, economic and financial narratives often emerge as a consequence of their virality, rather than their veracity, and constitute an important, but understudied driver of aggregate fluctuations. Using a unique dataset of newspaper articles over the 1950-2019 period and state-of-the-art methods from natural language processing, we characterize the properties of business cycle narratives. The main finding is that narratives tend to consolidate around a dominant explanation during expansions and fragment into competing explanations during contractions. We also show that the existence of past reference events is strongly associated with increased narrative consolidation.