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Fiscal talks: Parliamentary debates and government expenditure

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  • Hayo, Bernd
  • Zahner, Johannes

Abstract

We investigate the relationship between parliamentary debates and public expenditure by mapping legislative speeches to fiscally relevant topics and examining their connection in both long-term trends and short-term adjustments. Our analysis draws on transcripts of federal legislative discussions and federal government spending data in Germany (1950-2020), classified into nine policy functions (e.g. Social Security, National Defence and Education). We apply a state-of-the-art natural language processing technique - a structural topic model - to match identified debate topics to corresponding spending functions. Using cointegration analysis and error-correction models, we find (i) significant long-term equilibria between parliamentary debates and corresponding fiscal expenditure and (ii) that in cases of short-term disequilibrium, adjustments occur through government expenditure; that is, parliamentary debates are weakly exogenous.

Suggested Citation

  • Hayo, Bernd & Zahner, Johannes, 2025. "Fiscal talks: Parliamentary debates and government expenditure," IMFS Working Paper Series 226, Goethe University Frankfurt, Institute for Monetary and Financial Stability (IMFS).
    • Handle: RePEc:zbw:imfswp:334478
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    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • 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
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation

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