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How to interpret consumer confidence shocks? State-level evidence

Author

Listed:
  • Choi, Sangyup
  • Jeong, Jaehun
  • Yoo, Donghoon

Abstract

Using novel quarterly data of 29 U.S. states from 2005:I to 2015:IV, we revisit the link between consumer confidence and economic activity. We find that an innovation in consumer confidence is followed by a significant and persistent increase in consumption and output but a temporary decline in inflation. These findings suggest that the supply-side (news) interpretation of consumer confidence receives more empirical support than the demand-side (animal spirit) interpretation in our sample.

Suggested Citation

  • Choi, Sangyup & Jeong, Jaehun & Yoo, Donghoon, 2024. "How to interpret consumer confidence shocks? State-level evidence," Economics Letters, Elsevier, vol. 244(C).
    • Handle: RePEc:eee:ecolet:v:244:y:2024:i:c:s0165176524004695
    DOI: 10.1016/j.econlet.2024.111985
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    References listed on IDEAS

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    More about this item

    Keywords

    Consumer confidence; State-level analysis; Panel VARs; Great recession; News shock;
    All these keywords.

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E71 - Macroeconomics and Monetary Economics - - Macro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on the Macro Economy

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