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Does Finance Benefit Society? A Language Embedding Approach

Manish Jha¹; Hongyi Liu²; Asaf Manela²

¹ Georgia State University · ² Washington University in St. Louis

We measure popular sentiment toward finance by applying a large language model to millions of books published in eight countries over hundreds of years. We extensively validate this measure both internally and externally. We document persistent differences in finance sentiment across countries despite ample time-series variation. Books written in the languages of more capitalist countries discuss finance in a more positive context. Finance sentiment is correlated with survey-based measures of financial market participation and income inequality. Finance sentiment declines one year before rather than after financial crises. Positive shocks to finance sentiment are followed by higher output and credit growth.

DOI

10.1093/rfs/hhaf012

Volume

39 (5)

Pages

1227-1266

Language

en

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