ILO Research Department Webinar

Anxiety: Measuring the impact of economic stress on growth and jobs

We develop a simple model to capture the link between anxiety, strategic uncertainty driven by multiple narratives and investment in risky assets, which allows a role for policy measures to stabilise expectations. A new empirical measure of anxiety via a machine learning algorithm that applies sentiment analysis on news articles published online by The Daily Mail, Reuters and Press Association is constructed. The plausibility of the new measure is examined and it is used to carry out empirical tests of how anxiety shocks impact on stock market outcomes and verify a key prediction of the theoretical model. We discuss the policy implications our analysis focusing on the role of "lighthouse" policies in stabilizing expectations.

Presentation of working paper, available at: