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Consumption, sentiment, and economic news

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  • Martha Starr

Abstract

This paper investigates the influence of economic news on consumer sentiment, and examines whether ‘news shocks’ –- changes in coverage that would not be expected from incoming data on economic fundamentals -– have aggregate effects. Using monthly U.S. data and a structural vector-autoregression, I find that (1) sentiment is affected by news shocks, (2) after filtering out effects of news shocks, shocks to sentiment still have positive effects on consumer spending, and (3) news shocks influence both spending and unemployment in significant, though transitory ways. These results are consistent with other evidence of a role of non-fundamental factors in aggregate fluctuations.

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File URL: http://w.american.edu/cas/economics/repec/amu/workingpapers/2008-16.pdf
File Function: First version, 2008
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Bibliographic Info

Paper provided by American University, Department of Economics in its series Working Papers with number 2008-16.

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Length: 30 pages
Date of creation: Sep 2008
Date of revision:
Handle: RePEc:amu:wpaper:1608

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Web page: http://www.american.edu/cas/economics/

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Keywords: Consumption; consumer sentiment; economic news; aggregate fluctuations;

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