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Euro-area business confidence and COVID-19

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  • Gene Ambrocio

Abstract

I study the effects of the COVID-19 pandemic on business confidence in 11 Euro area countries and its impact on economic activity. To obtain causal effects, I instrument business confidence with domestic household confidence as well as household confidence in neighboring countries. I find evidence suggesting that the confidence channel was a sizable component to the economic transmission of COVID-19. A one standard deviation drop in business confidence leads to between 5–6 and 9% fall in economic activity in the industrial and wholesale and retail trade sectors, respectively. These results highlight the importance of managing confidence and expectations in crisis episodes.

Suggested Citation

  • Gene Ambrocio, 2022. "Euro-area business confidence and COVID-19," Applied Economics, Taylor & Francis Journals, vol. 54(43), pages 4915-4929, September.
    • Handle: RePEc:taf:applec:v:54:y:2022:i:43:p:4915-4929
    DOI: 10.1080/00036846.2022.2038777
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    More about this item

    JEL classification:

    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • E66 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General Outlook and Conditions
    • E71 - Macroeconomics and Monetary Economics - - Macro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on the Macro Economy
    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior

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