Fiscal policy in the Bundestag: Textual analysis and macroeconomic effects

Albina Latifi, Viktoriia Naboka-Krell, Peter Tillmann and Peter Winker

European Economic Review, 2024, vol. 168, issue C

Abstract: Fiscal policy is made in parliaments. 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. We also distinguish between sentiment related to exogenous and endogenous fiscal policy. We put fiscal sentiment into a series of recursively-identified vector autoregressive models to show that a change in fiscal sentiment causes a shift in government spending and has significant effects on the macroeconomy. The results support the notion that the debate in parliament contains information for the identification of government spending shocks.

Keywords: Text mining; Word embeddings; VAR models; Identification; Government spending (search for similar items in EconPapers)
JEL-codes: C89 E60 E62 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Working Paper: Fiscal Policy in the Bundestag: Textual Analysis and Macroeconomic Effects (2023)
Working Paper: Fiscal Policy in the Bundestag: Textual Analysis and Macroeconomic Effects (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:168:y:2024:i:c:s0014292124001569

DOI: 10.1016/j.euroecorev.2024.104827

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