Institute for New Economic Thinking

Successful navigation of the Covid-19 pandemic is predicated on public cooperation with safety measures and appropriate perception of risk, in which emotion and attention play important roles. Signatures of public emotion and attention are present in social media data, thus natural language analysis of this text enables near-to-real-time monitoring of indicators of public risk perception. We compare key epidemiological indicators of the progression of the pandemic with indicators of the public perception of the pandemic constructed from ∼20 million unique Covid-19-related tweets from 12 countries posted between 10th March and 14th June 2020. We find evidence of psychophysical numbing: Twitter users increasingly fixate on mortality, but in a decreasingly emotional and increasingly analytic tone. Semantic network analysis based on word co-occurrences reveals changes in the emotional framing of Covid-19 casualties that are consistent with this hypothesis. We also find that the average attention afforded to national Covid-19 mortality rates is modelled accurately with the Weber–Fechner and power law functions of sensory perception. Our parameter estimates for these models are consistent with estimates from psychological experiments, and indicate that users in this dataset exhibit differential sensitivity by country to the national Covid-19 death rates. Our work illustrates the potential utility of social media for monitoring public risk perception and guiding public communication during crisis scenarios.

Identifying systemically important countries is crucial for global financial stability. In this work we use (multilayer) network methods to identify systemically important countries. We study the financial system as a multilayer network, where each layer represent a different type of financial investment between countries. To rank countries by their systemic importance, we implement MultiRank, as well a simplistic model of financial contagion. In this first model, we consider that each country has a capital buffer, given by the capital to assets ratio. After the default of an initial country, we model financial contagion with a simple rule: a solvent country defaults when the amount of assets lost, due to the default of other countries, is larger than its capital. Our results show that when we consider that there are various types of assets the ranking of systemically important countries changes. We make all our methods available by introducing a python library. Finally, we propose a more realistic model of financial contagion that merges multilayer network theory and the contingent claims sectoral balance sheet literature. The aim of this framework is to model the banking, private, and sovereign sector of each country and thus study financial contagion within the country and between countries.