The Effect of Consumer Sentiment on Consumption: Cross-Sectional Evidence from Elections

Christian Gillitzer and Nalini Prasad

American Economic Journal: Macroeconomics, 2018, vol. 10, issue 4, 234-69

Abstract: We seek to identify the causal effect of sentiment innovations on consumption. Using unique Australian consumer sentiment survey data we show that, immediately after elections with a change of government, supporters of the winning party report substantially more optimistic beliefs about economic conditions than supporters of the losing party. We argue that this variation in beliefs is orthogonal to changes in fundamentals and find robust evidence that the shifts in sentiment affect spending intentions. Furthermore, using geographic variation in sentiment, vote-shares and automobile purchases we find evidence that stated spending intentions are indicative of actual spending.

JEL-codes: D12 D72 D84 E21 (search for similar items in EconPapers)
Date: 2018
Note: DOI: 10.1257/mac.20160244
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Citations: View citations in EconPapers (53)

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