IDEAS home Printed from https://ideas.repec.org/a/fip/fedfel/00173.html
   My bibliography  Save this article

How Persistent Are the Effects of Sentiment Shocks?

Author

Listed:
  • Jess Benhabib
  • Ben Shapiro
  • Mark M. Spiegel

Abstract

People?s feelings about the economy have been shown to be strongly connected to a state?s current economic health over short horizons. So, how well do such consumer sentiment measures coincide with economic growth over a longer period? Sentiment shocks are associated with large and statistically significant changes in state economic output over as long as a three-year horizon. While the sentiment shocks initially affect state consumption expenditures to a smaller degree, the impact tends to be more persistent, continuing as long as five years after the initial shock.

Suggested Citation

  • Jess Benhabib & Ben Shapiro & Mark M. Spiegel, 2018. "How Persistent Are the Effects of Sentiment Shocks?," FRBSF Economic Letter, Federal Reserve Bank of San Francisco.
    • Handle: RePEc:fip:fedfel:00173
    as

    Download full text from publisher

    File URL: https://www.frbsf.org/economic-research/files/el2018-22.pdf
    File Function: Full text
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Carroll, Christopher D & Fuhrer, Jeffrey C & Wilcox, David W, 1994. "Does Consumer Sentiment Forecast Household Spending? If So, Why?," American Economic Review, American Economic Association, vol. 84(5), pages 1397-1408, December.
    2. Christian Gillitzer & Nalini Prasad, 2016. "The Effect of Consumer Sentiment on Consumption," RBA Research Discussion Papers rdp2016-10, Reserve Bank of Australia.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Nowak, Sylwia & Anderson, Heather M., 2014. "How does public information affect the frequency of trading in airline stocks?," Journal of Banking & Finance, Elsevier, vol. 44(C), pages 26-38.
    2. Thomas M. Fullerton JR., 2001. "Specification of a Borderplex Econometric Forecasting Model," International Regional Science Review, , vol. 24(2), pages 245-260, April.
    3. Frank Westerhoff & Martin Hohnisch, 2010. "Consumer sentiment and countercyclical fiscal policies," International Review of Applied Economics, Taylor & Francis Journals, vol. 24(5), pages 609-618.
    4. Christopher D. Carroll & Misuzu Otsuka & Jirka Slacalek, 2006. "How Large Is the Housing Wealth Effect? A New Approach," NBER Working Papers 12746, National Bureau of Economic Research, Inc.
    5. repec:tiu:tiutis:bdbe10dd-649c-4521-ab28-7aa051a5bf82 is not listed on IDEAS
    6. Hatice Gökçe Karasoy Can & Çağlar Yüncüler, 2018. "The Explanatory Power and the Forecast Performance of Consumer Confidence Indices for Private Consumption Growth in Turkey," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 54(9), pages 2136-2152, July.
    7. Yeung, Matthew C.H. & Ramasamy, Bala & Chen, Junsong & Paliwoda, Stan, 2013. "Customer satisfaction and consumer expenditure in selected European countries," International Journal of Research in Marketing, Elsevier, vol. 30(4), pages 406-416.
    8. Kim, Kun & Park, Oun-joung & Yun, Seunghyun & Yun, Haejung, 2017. "What makes tourists feel negatively about tourism destinations? Application of hybrid text mining methodology to smart destination management," Technological Forecasting and Social Change, Elsevier, vol. 123(C), pages 362-369.
    9. Sergeant, Kelvin A. & Lugay, Beverly & Dookie, Michele, 2011. "Consumer confidence and economic growth: case studies of Jamaica and Trinidad and Tobago," Sede Subregional de la CEPAL para el Caribe (Estudios e Investigaciones) 4086, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    10. Gric, Zuzana & Ehrenbergerova, Dominika & Hodula, Martin, 2022. "The power of sentiment: Irrational beliefs of households and consumer loan dynamics," Journal of Financial Stability, Elsevier, vol. 59(C).
    11. Philip Lowe & Luci Ellis, 1997. "The Smoothing of Official Interest Rates," RBA Annual Conference Volume (Discontinued), in: Philip Lowe (ed.),Monetary Policy and Inflation Targeting, Reserve Bank of Australia.
    12. Marta Lachowska, 2013. "Expenditure, Confidence, and Uncertainty: Identifying Shocks to Consumer Confidence Using Daily Data," Upjohn Working Papers 13-197, W.E. Upjohn Institute for Employment Research.
    13. Berg Lennart & Bergström Reinhold, 1996. "Consumer Confidence and Consumption in Sweden," Working Paper Series 1996:7, Uppsala University, Department of Economics.
    14. repec:fip:fedhep:y:2013:i:qi:p:14-29:n:vol.37no.1 is not listed on IDEAS
    15. Vosen, Simeon & Schmidt, Torsten, 2012. "A monthly consumption indicator for Germany based on Internet search query data," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 19(7), pages 683-687.
    16. Dräger, Lena & Bui, Dzung & Nghiem, Giang & Hayo, Bernd, 2021. "Consumer Sentiment During the COVID-19 Pandemic," VfS Annual Conference 2021 (Virtual Conference): Climate Economics 242375, Verein für Socialpolitik / German Economic Association.
    17. Christopher D. Carroll & Wendy E. Dunn, 1997. "Unemployment Expectations, Jumping (S,s) Triggers, and Household Balance Sheets," NBER Chapters, in: NBER Macroeconomics Annual 1997, Volume 12, pages 165-230, National Bureau of Economic Research, Inc.
    18. Erik Kole & Liesbeth Noordegraaf-Eelens & Bas Vringer, 2019. "Cognitive Biases and Consumer Sentiment," Tinbergen Institute Discussion Papers 19-031/I, Tinbergen Institute, revised 21 Mar 2023.
    19. Christopher D. Carroll, 2001. "The Epidemiology of Macroeconomic Expectations," NBER Working Papers 8695, National Bureau of Economic Research, Inc.
    20. Osterloh, Steffen, 2018. "How do politics affect economic sentiment? The effects of uncertainty and policy preferences," VfS Annual Conference 2018 (Freiburg, Breisgau): Digital Economy 181614, Verein für Socialpolitik / German Economic Association.
    21. Das, J.W.M. & Dominitz, J. & van Soest, A.H.O., 1997. "Comparing Predictions and Outcomes : Theory and Application to Income Changes," Discussion Paper 1997-45, Tilburg University, Center for Economic Research.
    22. repec:zbw:bofrdp:2009_033 is not listed on IDEAS
    23. repec:ebl:ecbull:v:4:y:2005:i:14:p:1-10 is not listed on IDEAS
    24. Roy Batchelor & Pami Dua, 1997. "Consumer Confidence And The Probability Of Recession: A Markov Switching Model," Working papers 47, Centre for Development Economics, Delhi School of Economics.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fip:fedfel:00173. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Federal Reserve Bank of San Francisco Research Library (email available below). General contact details of provider: https://edirc.repec.org/data/frbsfus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.