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US Outlook and German Confidence: Does the Confidence Channel Work?

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  • Gustav Adolf Horn

Abstract

One channel of business cycle shock transmission which gained attraction only recently is the confidence channel. The aim of the paper is to find out whether the confidence channel is actually working between the US and Germany. This is analysed using times series methods. In contrast to other studies the direct informational content of leading US indicators for German producer confidence and the significance of asymmetric reactions is tested. The results show that there is a relationship between the respective variables, which has become closer during the nineties. However the hypothesis of asymmetries had to be rejected.

Suggested Citation

  • Gustav Adolf Horn, 2003. "US Outlook and German Confidence: Does the Confidence Channel Work?," Discussion Papers of DIW Berlin 324, DIW Berlin, German Institute for Economic Research.
    • Handle: RePEc:diw:diwwpp:dp324
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    File URL: https://www.diw.de/documents/publikationen/73/diw_01.c.40159.de/dp324.pdf
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    References listed on IDEAS

    as
    1. Backus, David K & Kehoe, Patrick J & Kydland, Finn E, 1992. "International Real Business Cycles," Journal of Political Economy, University of Chicago Press, vol. 100(4), pages 745-775, August.
    2. Baxter, Marianne, 1995. "International trade and business cycles," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 35, pages 1801-1864, Elsevier.
    3. Ball, Laurence & Mankiw, N Gregory, 1994. "Asymmetric Price Adjustment and Economic Fluctuations," Economic Journal, Royal Economic Society, vol. 104(423), pages 247-261, March.
    4. Canova, Fabio & Marrinan, Jane, 1998. "Sources and propagation of international output cycles: Common shocks or transmission?," Journal of International Economics, Elsevier, vol. 46(1), pages 133-166, October.
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    Cited by:

    1. Fei, S., 2011. "The confidence channel for the transmission of shocks," Working papers 314, Banque de France.

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    More about this item

    Keywords

    Confidence Channel; Business Cycle; Leading Indicators;
    All these keywords.

    JEL classification:

    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications

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