Sentiments and economic activity

Evidence from US states

Jess Benhabib, Mark M. Spiegel

    Research output: Contribution to journalArticle

    Abstract

    We examine whether sentiment influences aggregate demand by studying the relationship between the Michigan Survey expectations concerning national output growth and future economic activity at the state level. We instrument for local sentiments with political outcomes, positing that agents in states with a higher share of congressmen from the political party of the sitting President will be more optimistic. This instrument is strong in the first stage, and our results confirm a positive relationship between sentiments and future state economic activity that is robust to a battery of sensitivity tests.

    Original languageEnglish (US)
    Pages (from-to)715-733
    Number of pages19
    JournalEconomic Journal
    Volume129
    Issue number618
    DOIs
    StatePublished - Jan 1 2019

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    Economic activity
    Sentiment
    U.S. States
    Survey expectations
    Aggregate demand
    Political parties
    Output growth

    ASJC Scopus subject areas

    • Economics and Econometrics

    Cite this

    Sentiments and economic activity : Evidence from US states. / Benhabib, Jess; Spiegel, Mark M.

    In: Economic Journal, Vol. 129, No. 618, 01.01.2019, p. 715-733.

    Research output: Contribution to journalArticle

    Benhabib, Jess ; Spiegel, Mark M. / Sentiments and economic activity : Evidence from US states. In: Economic Journal. 2019 ; Vol. 129, No. 618. pp. 715-733.
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