The Reception of Fiscal News on Financial Markets: Evidence from News Tickers

Abstract

In this project, we aim to provide three contributions. First, we want to provide a detailed analysis of shocks to sovereign debt sustainability in the Euro area between 1999 and 2019. Second, we show how macroeconomic aggregates react to these shocks. To achieve our goals, we link news ticker data to high-frequency interest rates on European sovereign bonds. These data are used to identify shocks to sovereign debt sustainability. Local projections provide impulse-response functions of macroeconomic aggregates to these shocks. Using textual analysis, we can look at different dimensions of sovereign debt sustainability (election news; fiscal news; macroeconomic uncertainty).