Sentiments and Economic Activity: Evidence from U.S. States

Jess Benhabib and Mark Spiegel

No 23899, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: E20 E3 E32 (search for similar items in EconPapers)
Date: 2017-10
New Economics Papers: this item is included in nep-mac and nep-pol
Note: EFG
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Citations: View citations in EconPapers (7)

Published as Jess Benhabib & Mark M Spiegel, 2019. "Sentiments and Economic Activity: Evidence from US States," The Economic Journal, vol 129(618), pages 715-733.

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Related works:
Journal Article: Sentiments and Economic Activity: Evidence from US States (2019)
Working Paper: Sentiments and Economic Activity: Evidence from U.S. States (2016)
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