The role of sentiment in the US economy: 1920 to 1934

Ali Kabiri, Harold James, John Landon-Lane, David Tuckett, Rickard Nyman

Research output: Contribution to journalArticlepeer-review

Abstract

This paper investigates the role of sentiment in the US economy from 1920 to 1934 using digitised articles from The Wall Street Journal. We derive a monthly sentiment index and use a 10-variable vector error correction model to identify sentiment shocks that are orthogonal to fundamentals. We show the timing and strength of these shocks and their resultant effects on the economy using historical decompositions. Intermittent impacts of up to 15 per cent on industrial production, 10 per cent on the S&P 500 and bank loans, and 37 basis points for the credit risk spread suggest a large role for sentiment.

Original languageEnglish (US)
JournalEconomic History Review
DOIs
StateAccepted/In press - 2022

All Science Journal Classification (ASJC) codes

  • History
  • Economics and Econometrics

Keywords

  • Great Depression
  • US interwar economy
  • algorithmic text analysis
  • business sentiment

Fingerprint

Dive into the research topics of 'The role of sentiment in the US economy: 1920 to 1934'. Together they form a unique fingerprint.

Cite this