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In recent years, both theoretical and empirical economists have provided new insights that have significantly improved our understanding of the market for news. This very interesting paper by Rodrigo Taborda is a welcome addition to this area of research because of its innovative application of text analysis tools to the study of newspaper coverage of economic news in Colombia.

The paper documents three main facts. First, appreciations and depreciations of the Colombian peso–to–U.S. dollar exchange rate are not evenly covered by the most prominent Colombian newspapers. Instead, exchange rate appreciations appear to receive disproportionally more attention. Second, the language used to describe exchange rate appreciations in newspaper articles tends to make more frequent reference to “economic authorities” and “assistance” to affected groups compared with the language used to describe exchange rate depreciations. Third, the probability that the Colombian central bank intervenes in foreign exchange markets by buying dollars is positively correlated with the frequency of news covering exchange rate appreciations.

How should we interpret these three findings? The view preferred by the author is that newspapers reflect the interests of economic groups affected by exchange rate appreciations and that the central bank intervenes in the exchange market in reaction to the news coverage of appreciations. Although the results presented in the paper are indeed consistent with the preferred interpretation by the author, they cannot exclude other views, which are not explored in the paper. This suggests that it would be very useful to conduct additional research to test the view preferred by the author against alternative explanations.

Two avenues of additional research that are worth pursuing are documenting further supporting evidence for the media bias and government response view, and listing other plausible explanations for the facts and presenting explicit evidence against those alternatives. The rest of this comment discusses some alternative explanations of the main facts documented in the paper and offers some additional tests to distinguish between different interpretations of these facts.

Uneven Coverage of Appreciations and Depreciations

The author finds evidence that currency appreciations receive more intense news coverage in Colombia than currency depreciations and favors an explanation for this “bias” originating in the supply side of the markets for news. In other words, in the view of the author, journalists offer biased reporting to an ex ante unbiased public. However, alternative explanations of the uneven coverage of appreciations and depreciations may also come from the demand side of the news market (see, for example, Mullainathan and Shleifer 2005). In particular, unbiased journalists could cater to an ex ante biased public that demands biased news coverage, with the purpose of selling more newspapers or advertisement space.

A concrete demand-side explanation for the uneven reporting of exchange rate appreciations presumes journalists’ exploitation of behavioral characteristics of readers. Under this view, for example, news topics that are “newer” or less common and for which affected groups are easier to identify are in higher demand by news consumers. In the context of the behavior of the exchange rate, historical data on the nominal exchange rate in Colombia published by the Colombian central bank suggest that, for many decades, exchange rate depreciation was far more common than exchange rate appreciation (see also figure 1 in the paper for the most recent history of the exchange rate). By comparison, significant exchange rate appreciation is a relatively new phenomenon. In other words, depreciation of the exchange rate is not news material in Colombia any more.

In addition, economic groups negatively affected by currency appreciation (for example, exporters) are highly concentrated, but groups negatively affected by depreciation (for example, consumers of imported goods) are widely dispersed. Newspaper articles that portray a concentrated negative effect on a small and well-defined group of individuals are likely to find more readers than those that portray a dispersed effect on a vaguely defined group. In other words, news subjects that negatively and significantly affect a concentrated group allow the journalist to clearly identify the appropriate persons to interview and quote, so as to “put a human face” on the story.

Some evidence presented in the paper is in fact consistent with demand-side explanations of the uneven coverage of currency appreciations and depreciations...



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