DP15479 Economic Uncertainty and Divisive Politics: Evidence from the "dos Españas"

Author(s): Sandra Garcia-Uribe, Hannes Felix Mueller, Carlos Sanz
Publication Date: November 2020
Keyword(s):
JEL(s):
Programme Areas: Economic History, Macroeconomics and Growth
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=15479

This article exploits two newspaper archives to track economic policy uncertainty in Spain in 1905-1945, a period of extreme political polarization. We find that the outbreak of the civil war in 1936 was anticipated by a striking upward level shift of uncertainty in both newspapers. We study the dynamics behind this shift and provide evidence of a strong empirical link between increasing uncertainty and the rise of divisive political issues at the time: socio-economic conflict, regional separatism, power of the military, and role of the church. This holds even when we exploit variation in content at the newspaper level.