Email
y.couturier-roguet@lse.ac.uk 

Office address
Department of Economics 
London School of Economics and Political Sciences
Houghton Street, London WC2A 2AE 
UK

Placement Officer
Matthias Doepke

Supervisors
Benjamin Moll
Ricardo Reis

References
Ben Moll 
Department of Economics
London School of Economics and Political Sciences
Houghton St, London WC2A 2AE
b.moll@lse.ac.uk

Ricardo Reis
Department of Economics
London School of Economics and Political Sciences
Houghton St, London WC2A 2AE
r.a.reis@lse.ac.uk

Wouter den Haan 
Department of Economics
London School of Economics and Political Sciences
Houghton St, London WC2A 2AE 
w.denhaan@lse.ac.uk 

Ethan Ilzetzki 
Department of Economics 
London School of Economics and Political Sciences 
Houghton St, London WC2A 2AE 
e.ilzetzki@lse.ac.uk

The Sentiment Channel of Fiscal Policy

How does fiscal policy propagate to the economy? We uncover a new transmission channel - the sentiment channel - by showing that government spending makes firms overoptimistic about future demand, thereby stimulating investment and output. We construct a novel dataset linking microdata on Italian firms' sales, sales forecasts, and public procurement contracts. Using a natural experiment that shifted public spending across Italian municipalities, we find that an increase in government demand makes firms systematically overoptimistic about their future sales. This optimism extends beyond total revenues, as firms also raise their expectations about private sales. To interpret these findings, we develop a theory of expectations in which sentiment, a variable shaped by recent sales shocks, rises with public demand shocks and makes firms overoptimistic about both private and public sales. Incorporating sentiment into a q-theory of investment, we show that financial frictions are crucial for determining how belief distortions translate into real activity: investment rises with sentiment, but the effect is weaker for financially constrained firms. We embed this behavioral model of investment in a heterogeneous-firm New Keynesian model: calibrating the behavioral bias to our empirical estimates, we find that, by crowding-in investment, the sentiment channel nearly doubles the government spending multiplier. This amplification is state-dependent: the multiplier was a 33% smaller during the Global Financial Crisis than in recessions without financial distress. 

Publications 
Monetary Unions with Heterogeneous Fiscal Space, with M. Bellifemine and R. Jamilov (2025). Journal of International Economics, Volume 156, July 2025, 104092 [link] 

Working papers 
The Regional Keynesian Cross, with M. Bellifemine and R. Jamilov [link]
A Distributional Theory of Household Sentiments,  with M. Bellifemine and S. Hosseini [link] 
The Ecological Consumption Atlas, with M. Dumas, L. Gadenne, X. Jaravel. 

Works-in-progress 
Crises without FIRE: animal spirits and the financial accelerator with M. Bellifemine 
Firms' expectations and directed innovations: implications for growth  with M. Bellifemine 

Policy work 
Evaluation of the French stimulus package during Covid with a HANK Model, with B. Moll, R. Reis and S. Sabet [link]