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Confidence and the business cycle

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  • Sylvain Leduc

Abstract

The idea that business cycle fluctuations may stem partly from changes in consumer and business confidence is controversial. One way to test the idea is to use professional economic forecasts to measure confidence at specific points in time and correlate the results with future economic activity. Such an analysis suggests that changes in expectations regarding future economic performance are important drivers of economic fluctuations. Moreover, periods of heightened optimism are followed by a tightening of monetary policy.

Suggested Citation

  • Sylvain Leduc, 2010. "Confidence and the business cycle," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue nov22.
    • Handle: RePEc:fip:fedfel:y:2010:i:nov22:n:2010-35
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    References listed on IDEAS

    as
    1. Nir Jaimovich & Sergio Rebelo, 2007. "Behavioral Theories of the Business Cycle," Journal of the European Economic Association, MIT Press, vol. 5(2-3), pages 361-368, 04-05.
    2. Paul Beaudry & Franck Portier, 2006. "Stock Prices, News, and Economic Fluctuations," American Economic Review, American Economic Association, vol. 96(4), pages 1293-1307, September.
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    Cited by:

    1. Gabe de Bondt, 2017. "Confidence and monetary policy transmission," EcoMod2017 10197, EcoMod.

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    Keywords

    Business cycles; Consumer behavior;

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