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Animal spirits, fundamental factors and business cycle fluctuations

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  • Dées, Stephane
  • Zimic, Srečko

Abstract

We explore empirically the role of noisy information in cyclical developments to separate fluctuations due to genuine changes in fundamentals from those driven by temporary animal spirits (or noise shocks). Exploiting the fact that the econometrician has a richer dataset in some dimensions than the consumers, we use a novel identification scheme in a structural VAR framework and show that noise shocks are important drivers of business cycle fluctuations. In particular, noise shocks play a large role in consumption expenditures showing how false perceptions about future fundamentals influence consumer behaviors.

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  • Dées, Stephane & Zimic, Srečko, 2019. "Animal spirits, fundamental factors and business cycle fluctuations," Journal of Macroeconomics, Elsevier, vol. 61(C), pages 1-1.
    • Handle: RePEc:eee:jmacro:v:61:y:2019:i:c:14
    DOI: 10.1016/j.jmacro.2019.103123
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    Cited by:

    1. Hector H. Sandoval & Anita N. Walsh, 2021. "The role of consumer confidence in forecasting consumption, evidence from Florida," Southern Economic Journal, John Wiley & Sons, vol. 88(2), pages 757-788, October.
    2. Benhima, Kenza & Poilly, Céline, 2021. "Does demand noise matter? Identification and implications," Journal of Monetary Economics, Elsevier, vol. 117(C), pages 278-295.
    3. Kenza Benhima & Céline Poilly, 2017. "Do Misperceptions about Demand Matter? Theory and Evidence," Cahiers de Recherches Economiques du Département d'économie 17.08, Université de Lausanne, Faculté des HEC, Département d’économie.
    4. Laura Nowzohour & Livio Stracca, 2020. "More Than A Feeling: Confidence, Uncertainty, And Macroeconomic Fluctuations," Journal of Economic Surveys, Wiley Blackwell, vol. 34(4), pages 691-726, September.
    5. Öztürk, B. & Stokman, A.C.J., 2019. "Animal spirits and household spending in Europe and the US," Economics Letters, Elsevier, vol. 185(C).
    6. Hector H. Sandoval & Anita N. Walsh, 2024. "Sentiments and spending intentions: Evidence from Florida," Economic Inquiry, Western Economic Association International, vol. 62(3), pages 1046-1073, July.
    7. Jongrim Ha & Inhwan So, 2023. "Global Confidence, Uncertainty, and Business Cycles," International Journal of Central Banking, International Journal of Central Banking, vol. 19(1), pages 451-493, March.

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    More about this item

    Keywords

    Technology shocks; Noise shocks; Animal spirits; Business Cycles; Identification; Structural Vector Autoregression; Kalman Filter; Signal-extraction problem;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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