Narrative fragmentation and the business cycle?

According to Shiller (2017), 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-ofthe-art methods from natural language processing, we characterize the properties of business cycle narratives. Our 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. (c) 2021 Elsevier B.V. All rights reserved.

Automated summary

According to Shiller (2017), economic and financial narratives often emerge as a consequence of their virality rather than their veracity, and constitute an important yet understudied driver of aggregate fluctuations. The study found that business cycle narratives tend to consolidate around a dominant explanation during expansions and fragment into competing explanations during contractions. Furthermore, the presence of past reference events is strongly associated with increased narrative consolidation.