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Sentiments in SVARs

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  • Fève, Patrick
  • Guay, Alain

Abstract

This paper investigates the contribution of sentiments shocks to US fluctuations in a Structural VAR setup with long, medium and short run restrictions. Sentiments shocks are identified as shocks orthogonal to fundamentals that accounts for most of the variance of confidence. We assess our identification procedure from simulation experiments and show that it performs pretty well. From actual data, we obtain that, contrary to news shocks on total factor productivity, sentiments shocks explain very little of quantities and prices. Sentiments shocks mostly appear as an idiosyncratic component of confidence. These results are robust to various perturbations of the benchmark model.

Suggested Citation

  • Fève, Patrick & Guay, Alain, 2016. "Sentiments in SVARs," TSE Working Papers 16-656, Toulouse School of Economics (TSE).
  • Handle: RePEc:tse:wpaper:30484
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    Cited by:

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    2. Benhima, Kenza & Poilly, Céline, 2021. "Does demand noise matter? Identification and implications," Journal of Monetary Economics, Elsevier, vol. 117(C), pages 278-295.
    3. Clements, Michael P. & Galvão, Ana Beatriz, 2021. "Measuring the effects of expectations shocks," Journal of Economic Dynamics and Control, Elsevier, vol. 124(C).
    4. de Medeiros, Rennan Kertlly & da Silva Bejarano Aragón, Edilean Kleber & Besarria, Cássio da Nóbrega, 2023. "Effects of oil market sentiment on macroeconomic variables," Resources Policy, Elsevier, vol. 83(C).
    5. Brianti, Marco & Cormun, Vito, 2023. "Expectation-Driven Boom-Bust Cycles," Working Papers 2023-4, University of Alberta, Department of Economics.

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    More about this item

    Keywords

    Sentiment Shocks; News Shocks; SVARs; Identifying Restrictions;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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