The Economic Effects of U.S. Presidential Tax Communication: Evidence from a Correlated Topic Model

36 Pages Posted: 16 Mar 2017 Last revised: 21 Feb 2018

See all articles by Tom Dybowski

Tom Dybowski

University of Münster

Philipp Adämmer

University of Greifswald

Date Written: March 9, 2017

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 communication to economic activity.

Keywords: tax policy, U.S. president, news, sentiment, topic models

JEL Classification: C32, C82, D72, D83, E61

Suggested Citation

Dybowski, Tom and Adämmer, Philipp, The Economic Effects of U.S. Presidential Tax Communication: Evidence from a Correlated Topic Model (March 9, 2017). Available at SSRN: https://ssrn.com/abstract=2932775 or http://dx.doi.org/10.2139/ssrn.2932775

Tom Dybowski (Contact Author)

University of Münster ( email )

Universitätsstr. 14-16
Muenster, D-48143
Germany

Philipp Adämmer

University of Greifswald ( email )

Friedrich-Loeffler-Strasse 70
D-17487 Greifswald, 17489
Germany

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