POLICY RHETORIC CAN HAVE ECONOMIC CONSEQUENCES: PRESIDENTIAL RHETORICAL LIBERALISM AND ECONOMIC POLICY UNCERTAINTY

The response of economic variables to changes in the policy ideology expressed through presidential rhetoric is an area in need of extensive empirical exploration. An increase in liberal policy rhetoric can serve as an indicator of an executive branch that will, in general, attempt to increase government involvement in policy areas that have a significant bearing on the economy. Such policy rhetoric is a cue that should lower the extent of uncertainty about what the characteristics of economic policy will consist of. The recent development of a historical indicator of economic policy uncertainty in the United States allows researchers to assess whether the style employed in presidential rhetoric has any bearing on the extent of economic policy uncertainty that is present in the socio-political environment. The vector autoregression time series analysis performed in this project suggests presidential ideological tone Granger-causes economic policy uncertainty. The moving average representation analysis indicates an increase in presidential rhetorical liberalism results in a decrease in the economic policy uncertainty index for a period of time. Chief executives in the United States could be strategically expressing language supporting the expansion of federal government involvement in domestic affairs to mitigate the level of uncertainty about economic policy that is present in the socio-political environment.