BOK to Release 'News Sentiment Index' Weekly... "High Correlation with Key Economic Indicators"

[Asia Economy Reporter Seo So-jeong] The monthly 'News Sentiment Index (NSI),' which quantifies economic sentiment reflected in economic news articles, sharply declined immediately after the spread of COVID-19 but has exceeded the long-term average of 100 since October 2020.

On the 9th, the Bank of Korea announced, "After a 10-month trial release period, the NSI will be published weekly as 'experimental statistics' on the Bank of Korea Economic Statistics System (ECOS) starting from the 8th of this month."

Experimental statistics are not official national statistics but are compiled experimentally using new types of data or methods. The Statistics Korea introduced this to promote new statistics such as big data.

The NSI is an indicator created by extracting sample sentences from economic news articles on internet portal sites, then classifying the sentiment of each sentence as positive, negative, or neutral using machine learning methods, and calculating the difference between the number of positive and negative sentences to quantify the index.

The sample for index compilation consists of approximately 10,000 randomly extracted sample sentences daily from economic news articles of over 50 media outlets since 2005. To apply machine learning for sentiment classification, a portion of past news article sentences is first extracted and manually labeled for sentiment to build training data, which is then used to train the sentiment classification model to predict the sentiment of new sentences through supervised learning.

If the index is above 100, the economic sentiment reflected in news articles is interpreted as more optimistic than the historical average; if below 100, it is considered pessimistic. The standardization period is extended annually at the beginning of each year to the end of the previous year to revise past time series and enhance the index's reflection of reality.

According to the Bank of Korea, the daily NSI compiled from January 1, 2005, to January 31 of this year showed a generally symmetrical trend around the long-term average of 100 and was found to capture changes in economic sentiment promptly.

In particular, the recent trend of the NSI since 2020 shows that economic sentiment has significantly changed according to the progression of the COVID-19 pandemic and major economic issues. For user convenience, monthly indices have been additionally released alongside daily indices. According to this, the monthly NSI, which sharply declined immediately after the spread of COVID-19, has repeatedly fluctuated above the long-term average of 100 since October 2020.

A Bank of Korea official stated, "The monthly NSI showed a high correlation with major economic indicators such as the Consumer Confidence Index (CCSI) and the Composite Leading Index, leading them by 1 to 2 months."

The maximum correlation coefficient between the NSI and CCSI was 0.75, close to 1, indicating a strong correlation. The maximum correlation coefficients between the Composite Leading Index and the Business Survey Index (BSI) for all industries were also high at 0.76 and 0.61, respectively.

This content was produced with the assistance of AI translation services.