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Marriott Philadelphia Downtown, Grand Ballroom Salon A
American Economic Association
Confidence, Animal Spirits and Business Cycles
Saturday, Jan. 6, 2018 2:30 PM - 4:30 PM
- Chair: Robert Shiller, Yale University
Understanding Global Confidence Cycles
AbstractWe analyze the main cyclical features of consumer and business confidence. We first introduce a comprehensive database on consumer and business confidence at the quarterly frequency over the 1960-2016 period. The database covers business confidence for 65 countries and consumer confidence for 68 countries, with almost half of the countries in each series comprising of emerging and developing economies. A novel feature of the database is that confidence measures are standardized across counties so that it is suitable for cross-country analysis. Our results suggest that business and consumer confidence are procyclical and leading in nature. They also tend to exhibit sizeable comovement across countries suggesting the presence of a global confidence cycle. The pattern of comovement in confidence closely mirrors that of output comovement that is widely documented in the international business cycle literature.
Animal Spirits, Fundamental Factors and Business Cycle Fluctuations
AbstractWe explore empirically the role of noisy information in cyclical developments to separate fluctuations due to genuine changes in fundamentals from those driven by temporary animal spirits (or noise shocks). Exploiting the fact that the econometrician has a richer dataset in some dimensions than the consumers, we use a novel identification scheme in a structural VAR framework and show that noise shocks are important drivers of business cycle fluctuations. In particular, noise shocks play a large role in consumption expenditures showing how false perceptions about future fundamentals influence consumer behaviours. By contrast, interest rates are much less impacted by noise shocks.
Francis X. Diebold,
University of Pennsylvania and NBER
Federal Reserve Bank of St. Louis
- E3 - Prices, Business Fluctuations, and Cycles
- F4 - Macroeconomic Aspects of International Trade and Finance