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Do Changes in the Stock Market Affect Consumer and Business Confidence?

Author

Listed:
  • Willem Van Zandweghe

Abstract

I find that measures of consumer and business confidence respond to stock market surprises. My evidence points to a confidence channel from financial conditions to the real economy. By signaling strong future incomes and profits, high equity valuations boost consumer and business confidence, which in turn stimulates real spending today. These relationships highlight a risk that the recent stock market decline could sap confidence, with adverse effects on real activity.

Suggested Citation

  • Willem Van Zandweghe, 2019. "Do Changes in the Stock Market Affect Consumer and Business Confidence?," Macro Bulletin, Federal Reserve Bank of Kansas City, issue January 9, pages 1-3, January.
    • Handle: RePEc:fip:fedkmb:00073
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    File URL: https://www.kansascityfed.org/documents/5618/macrobulletins-Do%20Changes%20in%20the%20Stock%20Market%20Affect%20Consumer%20and%20Business%20Confidence%3F.pdf
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    More about this item

    Keywords

    Consumer Confidence; Business Confidence; Stock Market;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

    Statistics

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