The Economic Effects of U.S. Presidential Tax Communication : Evidence from a Correlated Topic Model

We combine a probabilistic topic model and a dictionary-based sentiment analysis to construct a time series, which indicates when and how (positive vs. negative) the U.S. president communicates his tax policy news to the public. The econometric analyses show that optimistic tax policy statements stimulate consumption, investment, and output, even after controlling for tax foresight. We also find that consumer sentiment reacts positively to more optimistic tax news, suggesting that sentiment plays an important role in the transmission from U.S. presidential tax communication to economic activity