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News or animal spirits? Consumer confidence and economic activity: Redux

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  • Sangyup Choi
  • Jaehun Jeong
  • Dohyeon Park
  • Donghoon Yoo

Abstract

Barsky and Sims (2012, AER) demonstrated, via indirect inference, that confidence innovations can be viewed as noisy signals about medium‐term economic growth. They highlighted that the connection between confidence and subsequent activity, such as consumption and output, is primarily driven by news shocks about the future. We expand upon their research by incorporating the Great Recession and ZLB episodes, during which animal spirits have a greater potential to influence economic activity. Nevertheless, we confirm the main finding of Barsky and Sims (2012) that this relationship is predominantly driven by news about the future rather than animal spirits.

Suggested Citation

  • Sangyup Choi & Jaehun Jeong & Dohyeon Park & Donghoon Yoo, 2024. "News or animal spirits? Consumer confidence and economic activity: Redux," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 39(5), pages 960-966, August.
    • Handle: RePEc:wly:japmet:v:39:y:2024:i:5:p:960-966
    DOI: 10.1002/jae.3070
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    More about this item

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • 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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