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Consumer and business confidence connectedness in the euro area: a tale of two crises

Author

Listed:
  • Adrian Fernandez-Perez
  • Marta Gómez-Puig
  • Simon Sosvilla-Rivero

Abstract

PurposeThe purpose of this study is to examine the propagation of consumer and business confidence in the euro area with a particular focus on the global financial crisis (GFC), the European sovereign debt crisis (ESDC) and the COVID-19-induced Great Lockdown.Design/methodology/approachThe authors apply Diebold and Yilmaz’s connectedness framework and the improved method based on the time-varying parameter vector autoregressive model.FindingsThe authors find that although the evolution of business confidence marked the GFC and the ESDC the role of consumer confidence (mainly in those countries with stricter containment and closure measures) increased in the COVID-19-induced crisis.Originality/valueThe findings are related to the different origins of the examined crisis periods, and the analysis of their interrelationship is a very relevant topic for future research.

Suggested Citation

  • Adrian Fernandez-Perez & Marta Gómez-Puig & Simon Sosvilla-Rivero, 2024. "Consumer and business confidence connectedness in the euro area: a tale of two crises," Applied Economic Analysis, Emerald Group Publishing Limited, vol. 33(98), pages 77-91, April.
    • Handle: RePEc:eme:aeapps:aea-01-2024-0028
    DOI: 10.1108/AEA-01-2024-0028
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    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • E66 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General Outlook and Conditions
    • E71 - Macroeconomics and Monetary Economics - - Macro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on the Macro Economy

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