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Measures of investor and consumer confidence and policy actions in the current crisis

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  • Dailami, Mansoor
  • Masson, Paul

Abstract

The current financial crisis has highlighted the danger that declines in confidence can have a self-fulfilling effect on economic activity. In this paper, the authors consider ways of measuring investor and consumer confidence, and try to explain the evolution of confidence using measures of financial volatility, investment performance, macroeconomic outcomes, and policy actions. They identify a link between investor and consumer confidence. Finally, they show that liquidity provision and easing of interest rates had only a limited effect on financial market spreads during the crisis, arguing for additional measures to address the loss of confidence. The paper focuses on the need for financial regulatory reform, and shows how the incentives to cooperate in this area are stimulated by a common shock to confidence.

Suggested Citation

  • Dailami, Mansoor & Masson, Paul, 2009. "Measures of investor and consumer confidence and policy actions in the current crisis," Policy Research Working Paper Series 5007, The World Bank.
    • Handle: RePEc:wbk:wbrwps:5007
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    File URL: http://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2009/07/20/000158349_20090720145703/Rendered/PDF/WPS5007.pdf
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    Cited by:

    1. Dailami, Mansoor, 2010. "Sovereign debt distress and corporate spillover impacts," Policy Research Working Paper Series 5380, The World Bank.

    More about this item

    Keywords

    Debt Markets; Emerging Markets; Currencies and Exchange Rates; Banks&Banking Reform;
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