Argus Information & Advisory Services
1 North Lexington Avenue
White Plains, NY 10601
Institutional Affiliation: Argus Information & Advisory Services
NBER Working Papers and Publications
|July 2015||Government Economic Policy, Sentiments, and Consumption|
with , : w21316
We examine how consumption responds to changes in sentiment regarding government economic policy using cross-sectional variation across counties in the ideological predisposition of constituents. When the incumbent party loses a presidential election, individuals in counties more ideologically predisposed toward the losing party experience a dramatic and discontinuous relative decrease in optimism on government economic policy. Using the interaction of constituent ideology in a county with election timing as an instrument, we estimate the impact of government policy sentiment shocks on consumer spending, and we find a very small effect that cannot be statistically distinguished from zero. The small magnitude of the effect is estimated precisely. For example, we can reject the hypothesis th...