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Confidence and business investment

Author

Listed:
  • Andersson, Malin
  • Mosk, Benjamin

Abstract

Economic agents’ confidence and developments in the real economy are intrinsically linked. Confidence largely reflects broad economic conditions but, at times, may also become an autonomous source of business cycle fluctuations. This box looks at the potential propagation effects of lower confidence on investment in recent times. Isolating the structural confidence shocks from the euro area Economic Sentiment Indicator and applying them in the ECB’s main macroeconomic projection model suggests that confidence shocks had a positive impact on business investment growth in the last two years and a negative one in 2019. JEL Classification: E22, E37, D84

Suggested Citation

  • Andersson, Malin & Mosk, Benjamin, 2019. "Confidence and business investment," Economic Bulletin Boxes, European Central Bank, vol. 4.
    • Handle: RePEc:ecb:ecbbox:2019:0004:4
    Note: 427284
    as

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    File URL: https://www.ecb.europa.eu//pub/economic-bulletin/focus/2019/html/ecb.ebbox201904_04~61b85a8df9.en.html
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    More about this item

    Keywords

    confidence; Investment;

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations

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