'Whatever it Takes' to Change Belief: Evidence from Twitter

Michael Stiefel (1) , Rémi Vivès (2)

1 UZH - Universität Zürich [Zürich] = University of Zurich
2 AMSE - Aix-Marseille Sciences Economiques

The sovereign debt literature emphasizes the possibility of avoiding a self-fulfilling default crisis if markets anticipate the central bank to act as lender of last resort. This paper investigates the extent to which changes in belief about an intervention of the European Central Bank (ECB) explain the sudden reduction of government bond spreads for the distressed countries in summer 2012. We study Twitter data and extract belief using machine learning techniques. We find evidence of strong increases in the perceived likelihood of ECB intervention and show that those increases explain subsequent decreases in the bond spreads of the distressed countries.

Mots clés: self-fulfilling default crisis; unconventional monetary policy; Twitter data

Domaines: Economies et finances

Michael Stiefel, Rémi Vivès. 'Whatever it Takes' to Change Belief: Evidence from Twitter. 2019. ⟨halshs-02053429v2⟩