New issue of Russian Journal of Money and Finance: Modelling trust and predictive power of news
The first issue of the scholarly quarterly Russian Journal of Money and Finance of 2025 has been published. The new issue covers such topics as modelling trust in the central bank based on social media data, forecasting inflation using news texts, and analysing factors impacting inflation risks.
Trust in the central bank is an important factor determining the efficiency of monetary policy: the higher the level of trust in the central bank, the stronger the effect of its monetary policy on inflation expectations. Trust is usually measured relying on survey data, but conducting surveys is a complex and costly procedure. Anastasia Matevosova (Lomonosov Moscow State University; Institute of Economics of the Russian Academy of Sciences) suggests using big data analysis and builds an indicator based on sentiment analysis of textual data, namely comments on the VK social network. This indicator can be built with any frequency, e.g. using weekly or annual data. Short-term modelling based on weekly data reveals that a positive credibility shock with a two-week lag negatively affects inflation expectations.
Textual analysis using neural networks can also help in predicting inflation: Elizaveta Volgina (Lomonosov Moscow State University) uses news from mass media along with standard macro variables, such as wage dynamics, the production index, or crude prices. The author shows that forecasts taking into account news indices are more accurate.
Pursuing monetary policy, central banks need to factor in not only the inflation forecast but also the risk that inflation might exceed the predicted rate. A situation where the risk of high inflation is more significant, even when the forecast is the same, requires tighter monetary policy measures. Analysing factors of inflation risks, Alexandra Chudaeva (RANEPA) shows that they include wage growth and a decline in production over a one-year horizon and an increase in retail turnover and a weaker ruble over a one-month horizon.
The new issue of the Russian Journal of Money and Finance (No. 1, 2025) is available on the website.