The Bank of Korea announced today (September 1) that it will release a new News Sentiment Index (NSI) designed to capture economic sentiment reflected in economic news with greater precision.

The BOK will make the new NSI public at noon today.

The new NSI will be published weekly on the Bank of Korea Economic Statistics System (ECOS) without a separate press release.

The new NSI addresses the limitations of the previous version by utilizing state-of-the-art language models.

The former NSI has been published as an experimental statistic since February 2022.

Reflecting advancements in natural language processing technology that allow language models to comprehend the context of articles beyond just specific words or partial sentences, the BOK established a new calculation framework.

The most notable feature of the new NSI calculation process is that only articles with a high relevance to domestic economic activities are selected and used for sentiment analysis.

Choi Byung-jae, head of the BOK's Statistical Research Team, explained, "In the article selection process, promotional advertisements and articles regarding overseas companies that contain no information linked to South Korea's economy were excluded."

By classifying the timing of the selected articles into the present and the future, it is also possible to calculate economic sentiment by time frame.

The BOK also built models to classify economic relevance, time frame, and sentiment by fine-tuning a pre-trained language model specialized in the Korean language.

The sample of sentences used for sentiment analysis was doubled from 10,000 to 20,000, and neutral sentences—in addition to positive and negative ones—were incorporated into the index calculation to reduce volatility and potential distortion.

In an issue note titled "New News Sentiment Index Utilizing Language Models" released today, the BOK stated that while the new NSI captures economic sentiments similar to the old NSI, its leading property over official sentiment indicators has been strengthened.

According to the report, the new NSI showed the highest correlation when leading the Consumer Sentiment Index and the Economic Sentiment Index by one month, and the Business Sentiment Index by two months.

Furthermore, news covering the future showed a higher correlation with consumer sentiment than news about the present, and negative news showed a higher correlation than positive news.

Causality with the real economy was also confirmed.

The analysis showed that when news sentiment improved, consumption increased within one month before the effect dissipated, while the expansion effect on investment lasted for about 7 to 8 months.

The report particularly noted, "The new NSI contains additional economic condition information that is not included in real economy indicators such as industrial production," adding, "It is deemed highly useful as an economic monitoring indicator in situations where real-sector indicators cannot be observed due to publication time lags."

(Photo: Yonhap News)