This website uses cookies.

By clicking the "Accept" button or continuing to browse our site, you agree to first-party and session-only cookies being stored on your device to enhance site navigation and analyze site performance and traffic. For more information on our use of cookies, please see our Privacy Policy.

  1. Home
  2. Journals
  3. American Economic Journal: Macroeconomics
  4. October 2018
  5. The Effect of Consumer Sentiment on Consumption: Cross-Sectional Evidence from Elections

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

  • Christian Gillitzer
  • Nalini Prasad
American Economic Journal: Macroeconomics
vol. 10, no. 4, October 2018
(pp. 234-69)
Download Full Text PDF

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.

Citation

Gillitzer, Christian, and Nalini Prasad. 2018. "The Effect of Consumer Sentiment on Consumption: Cross-Sectional Evidence from Elections." American Economic Journal: Macroeconomics, 10 (4): 234-69. DOI: 10.1257/mac.20160244

Additional Materials

JEL Classification

  • D12 Consumer Economics: Empirical Analysis
  • D72 Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
  • D84 Expectations; Speculations
  • E21 Macroeconomics: Consumption; Saving; Wealth
There are no comments for this article.
Login to Comment