Fiscal talks: Parliamentary debates and government expenditure

Bernd Hayo and Johannes Zahner

No 226, IMFS Working Paper Series from Goethe University Frankfurt, Institute for Monetary and Financial Stability (IMFS)

Abstract: We investigate the relationship between parliamentary debates and public expenditure by mapping legislative speeches to fiscally relevant topics and examining their connection in both long-term trends and short-term adjustments. Our analysis draws on transcripts of federal legislative discussions and federal government spending data in Germany (1950-2020), classified into nine policy functions (e.g. Social Security, National Defence and Education). We apply a state-of-the-art natural language processing technique - a structural topic model - to match identified debate topics to corresponding spending functions. Using cointegration analysis and error-correction models, we find (i) significant long-term equilibria between parliamentary debates and corresponding fiscal expenditure and (ii) that in cases of short-term disequilibrium, adjustments occur through government expenditure; that is, parliamentary debates are weakly exogenous.

Keywords: Fiscal expenditure; parliamentary debate; Bundestag; text analysis; structural topic model; error-correction model (search for similar items in EconPapers)
JEL-codes: C32 D78 E62 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:imfswp:334478

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