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Sentiments in SVARs

Author

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  • Patrick Fève
  • Alain Guay

Abstract

This article investigates the contribution of sentiment shocks to US fluctuations in a Structural VAR setup with restrictions at various frequencies. Sentiments shocks are identified as shocks orthogonal to fundamentals that account for most of the variance of confidence. We obtain that, contrary to news shocks on total factor productivity, sentiment shocks explain little of quantities and prices. Sentiments shocks mostly appear as an idiosyncratic component of confidence. These results are robust to various perturbations.

Suggested Citation

  • Patrick Fève & Alain Guay, 2019. "Sentiments in SVARs," The Economic Journal, Royal Economic Society, vol. 129(618), pages 877-896.
    • Handle: RePEc:oup:econjl:v:129:y:2019:i:618:p:877-896.
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    File URL: http://hdl.handle.net/10.1111/ecoj.12580
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    Cited by:

    1. Choi, Sangyup & Jeong, Jaehun & Yoo, Donghoon, 2024. "How to interpret consumer confidence shocks? State-level evidence," Economics Letters, Elsevier, vol. 244(C).
    2. Cascaldi-Garcia, Danilo, 2025. "Forecast revisions as instruments for news shocks," Journal of Monetary Economics, Elsevier, vol. 151(C).
    3. Clements, Michael P., 2025. "Inconsistent survey histograms and point forecasts revisited," Journal of Economic Behavior & Organization, Elsevier, vol. 236(C).
    4. Fève, Patrick & Collard, Fabrice & Guay, Alain, 2024. "Believe it or not, it’s all about Beliefs!," TSE Working Papers 24-1539, Toulouse School of Economics (TSE).
    5. Brianti, Marco & Cormun, Vito, 2024. "Expectation-driven boom-bust cycles," Journal of Monetary Economics, Elsevier, vol. 146(C).
    6. Christopher Biolsi & Alex Lebedinsky, 2021. "Can changes in sentiments influence consumer behavior? Evidence from the Trump‐Russia investigation," Economic Inquiry, Western Economic Association International, vol. 59(4), pages 1569-1592, October.
    7. Benhima, Kenza & Poilly, Céline, 2021. "Does demand noise matter? Identification and implications," Journal of Monetary Economics, Elsevier, vol. 117(C), pages 278-295.
    8. 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).
    9. Jonathan Adams & Philip Barrett, 2024. "Shocks to Inflation Expectations," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 54, October.

    More about this item

    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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