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Fiscal Policy in the Bundestag: Textual Analysis and Macroeconomic Effects

Author

Listed:
  • Albina Latifi

    (Justus Liebig University Giessen)

  • Viktoriia Naboka-Krell

    (Justus Liebig University Giessen)

  • Peter Tillmann

    (Justus Liebig University Giessen)

  • Peter Winker

    (Justus Liebig University Giessen)

Abstract

Fiscal policy is made in parliament. We go to the roots of changes of fiscal policy in Germany and use a novel data set on all parliamentary speeches in the Bundestag from 1960 to 2021. We propose an embedding-based approach, which allows the representation of words and documents in a shared vector space, in order to measure fiscal policy-related sentiment in parliamentary debates at a scale from contractionary to expansionary. For this purpose, a dictionary containing terms related to expansionary and contractionary policy measures is created. We put fiscal sentiment into a series of recursively-identified vector autoregressive (VAR) models to show that a change in fiscal sentiment causes a change in government spending and has strong effects on the macroeconomy. The results support the notion that the debate in parliament contains information for the identification of government spending shocks.

Suggested Citation

  • Albina Latifi & Viktoriia Naboka-Krell & Peter Tillmann & Peter Winker, 2023. "Fiscal Policy in the Bundestag: Textual Analysis and Macroeconomic Effects," MAGKS Papers on Economics 202307, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    • Handle: RePEc:mar:magkse:202307
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    References listed on IDEAS

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    More about this item

    Keywords

    text mining; word embeddings; VAR models; identification; government spending;
    All these keywords.

    JEL classification:

    • C89 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Other
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory

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