The Political Economy: Political Determinants of the Macroeconomy
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Although political scientists have devoted thousands of pages to the role economic conditions play in political evaluations, less attention has been devoted to the role politics plays in explaining changes in economic behavior and the macroeconomy. Similarly, economists have spent decades studying the factors that lead to changes in macroeconomic conditions but have ignored most political variables. Linking the two literatures, I argue that in order to fully understand the economy one needs to incorporate politics--specifically presidential approval--and the media in addition to variables typically employed in macroeconomic models. This dissertation addresses three overlapping research questions. I first introduce a new measure of media sentiment and test its usefulness in a model of presidential approval. In the second empirical chapter, I examine the relationship between consumer confidence and presidential approval during two very different presidencies. Finally, I explore the effect of politics not just on economic behavior but also on volatility in that behavior. I find that consumer expenditures respond not only to the level of approval but also to volatility in approval. This provides evidence of the importance of political stability to economic growth in the United States, something long acknowledged in the comparative literature but largely absent from studies of the U.S. economy and politics.