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The economic effects of U.S. presidential tax communication: Evidence from a correlated topic model

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  • Dybowski, T.P.
  • Adämmer, P.

Abstract

We combine a probabilistic topic model and a dictionary-based sentiment analysis to construct a time series, which indicates when and how (positive vs. negative) the U.S. president communicates his tax policy news to the public. The econometric analyses show that optimistic tax policy statements stimulate consumption, investment, and output, even after controlling for tax foresight. We also find that consumer sentiment reacts positively to more optimistic tax news, suggesting that sentiment plays an important role in the transmission from U.S. presidential tax policy communication to economic activity.

Suggested Citation

  • Dybowski, T.P. & Adämmer, P., 2018. "The economic effects of U.S. presidential tax communication: Evidence from a correlated topic model," European Journal of Political Economy, Elsevier, vol. 55(C), pages 511-525.
  • Handle: RePEc:eee:poleco:v:55:y:2018:i:c:p:511-525
    DOI: 10.1016/j.ejpoleco.2018.05.001
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    Cited by:

    1. Adam Jassem & Lenard Lieb & Rui Jorge Almeida & Nalan Bac{s}turk & Stephan Smeekes, 2021. "Min(d)ing the President: A text analytic approach to measuring tax news," Papers 2104.03261, arXiv.org.
    2. Jon Ellingsen & Vegard H. Larsen & Leif Anders Thorsrud, 2020. "News Media vs. FRED-MD for Macroeconomic Forecasting," CESifo Working Paper Series 8639, CESifo.
    3. Larsen, Vegard H. & Thorsrud, Leif Anders & Zhulanova, Julia, 2021. "News-driven inflation expectations and information rigidities," Journal of Monetary Economics, Elsevier, vol. 117(C), pages 507-520.
    4. Sturm, Silke, 2019. "Political Competition: How to Measure Party Strategy in Direct Voter Communication using Social Media Data?," Hamburg Discussion Papers in International Economics 1, University of Hamburg, Chair of International Economics.
    5. Michal Ovádek & Nicolas Lampach & Arthur Dyevre, 2020. "What’s the talk in Brussels? Leveraging daily news coverage to measure issue attention in the European Union," European Union Politics, , vol. 21(2), pages 204-232, June.

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    More about this item

    Keywords

    Tax policy; U.S. president; News; Sentiment; Topic models;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C82 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Macroeconomic Data; Data Access
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination

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