Do Sunspots Reflect Consumer Confidence? An Empirical Investigation
AbstractI examine a model with an indeterminate equilibrium in which business cycles are driven by sunspot shocks. I focus on the possibility that the sunspot shocks reflect consumer confidence. I compute an implied series of sunspot shocks using the intertemporal Euler equation and interpret them as changes in nonfundamental confidence. I then compute a measure of nonfundamental confidence using U.S. data and find a statistically significant correlation between the two series. I therefore conclude that the measured sunspots represent well the behavior of confidence in U.S. data.
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Bibliographic InfoArticle provided by Eastern Economic Association in its journal Eastern Economic Journal.
Volume (Year): 31 (2005)
Issue (Month): 1 (Winter)
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More information through EDIRC
Business Cycle; Cycle; Equilibrium; Sunspot;
Find related papers by JEL classification:
- E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
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