The Measurement of Real-Time Perceptions of Financial Stress: Implications for Political Science

Gandrud, C. & Hallerberg, M. (2017). The Measurement of Real-Time Perceptions of Financial Stress: Implications for Political Science. British Journal of Political Science, doi: 10.1017/S0007123417000291

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Abstract

Responding to financial market disruptions is a defining challenge for policymakers and a central topic of political research. Yet established measures of financial conditions have significant shortcomings. Annual binary crisis variables limit our ability to explore non-linear relationships and the political effects of rapidly changing conditions. Continuous indicators have their own flaws in operationalization and reproducability. We create a continuous measure of real-time perceived stress using a kernel principal component analysis (KPCA) of Economist monthly country reports. We demonstrate the usefulness of our measure by showing that it more accurately captures the effect of financial market stress levels on electoral volatility. We also show how KPCA can be used to efficiently summarize large quantities of texts into cross-sectional time-series variables.

Item Type: Article
Additional Information: This article has been published in a revised form in British Journal of Political Science https://doi.org/10.1017/S0007123417000291. This version is free to view and download for private research and study only. Not for re-distribution, re-sale or use in derivative works. © Gandrud, C. & Hallerberg, M.
Uncontrolled Keywords: financial crisis, economic policymaking, banking, electoral volatility, natural language processing
Divisions: School of Social Sciences > Department of International Politics
URI: http://openaccess.city.ac.uk/id/eprint/18569

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