Daily Judgement: Political News and Financial Markets. Issue 4 (4th July 2021)

• Record Type: Journal Article
• Authors: Breen, Michael; McMenamin, Iain; Courtney, Michael; McNulty, Gemma
• Is Part Of: New political economy. Volume 26:Issue 4(2021)
• Page Start: 616
• Page End: 630
• Publication Date: 2021-07-04
• Subjects: Political economy -- sovereign debt -- economic policy -- advanced economies -- automatic content analysis; Economics -- Periodicals; International economic relations -- Periodicals; 330.05
• DOI: 10.1080/13563467.2020.1806221
• Languages: English
• ISSNs: 1356-3467

Abstract

ABSTRACT: Political economists disagree about the extent to which markets monitor politics in advanced economies. Some argue that investors are interested in a handful of macroeconomic indicators, while others say that markets also watch political competition closely. We argue that political competition drives variation in the government bond market more than information about economic policy. Using a new automatic classifier, we code the content of millions of newspaper paragraphs about the UK from 1986 to 2012. We then test the impact of news on government debt. We find that political news is correlated with bond prices and that macroeconomic policy news is not. Our results suggest that the market passes daily judgement on politics, not merely cleaving to seldom-released official statistics or focusing on occasional events like elections.