We explore the dynamics of media chatter about economic reforms using text analysis from about a billion newspaper articles in 28 languages. We show that the intensity of reform chatter increases during economic downturns. This increase is more significant in democracies. Using instrumental variable techniques, we find the relationship to be causal. We also document that reform chatter is followed by actual reforms, suggesting that democracies benefit from a “self- correcting” mechanism stemming from changing popular attitudes towards reform.
Financial Markets Group Discussion Papers DP 810