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Sentiments and Economic Activity : Annual Data : Evidence from U.S. States, Working Paper 2016-19

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Sentiments and Economic Activity : Annual Data : Evidence from U.S. States, Working Paper 2016-19

DATE: October 3, 2017

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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.

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Federal Reserve Bank of San Francisco. "Sentiments and Economic Activity : Annual Data : Evidence from U.S. States, Working Paper 2016-19" in Working Papers (Federal Reserve Bank of San Francisco) (October 3, 2017). https://fraser.stlouisfed.org/title/7038/item/639499/content/dta/frbsf_wp2016-19_annual-data, accessed on July 15, 2025.

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EDITION: Revised

SUBJECTS: THEMES: CLASSIFICATION:
  • jel: E20
  • jel: E32
IDENTIFIER:
  • doi: 10.24148/wp2016-19
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