Economic Uncertainty and Divisive Politics: Evidence from the dos Españas

This article exploits two newspaper archives to track economic policy uncertainty in Spain from 1905–1945. 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 reasons for this shift through a natural language processing method, which allows us to leverage expert opinion to track specific issues in our newspaper archives. We find a strong empirical link between increasing uncertainty and the rise of divisive political issues like socio-economic conflict. This holds even when exploiting content differences between the two newspapers in our corpus.