Animal spirits, fundamental factors and business cycle fluctuations

Dées, Stéphane; Zimic, Srečko

doi:10.1016/j.jmacro.2019.103123

Cited by 8 publications

(10 citation statements)

References 15 publications

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“…One would need to control for news and noise in real time in order to be sure to capture pure animal spirits. While there have been attempts to trace back the effect of sentiment shocks on macroeconomic variables to its roots, for example, using structural Vector Autoregressions (VARs) (e.g., Dées and Guntner, 2014; Levchenko and Pandalai‐Nayar, 2020), ex post measures of economic developments (e.g., Dées and Zimic, 2019) or survey‐based nowcast errors (e.g., Kleemann et al ., 2017), the results are heterogeneous. We do not take a stand on any of these approaches here, but rather give an overview of recent contributions to the literature on economic sentiment.…”

Section: Literaturementioning

confidence: 99%

More Than a Feeling: Confidence, Uncertainty, and Macroeconomic Fluctuations

Nowzohour

Stracca

2020

Journal of Economic Surveys

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Economists, observers, and policy‐makers often emphasize the role of sentiment as a potential driver of the business cycle. In this paper, we provide three contributions to this debate. First, we give an overview of the recent literature on the nexus between sentiment (considering both confidence and uncertainty) and economic activity. Second, we review existing empirical measures of sentiment, in particular consumer confidence, stock market volatility (SMV) and Economic Policy Uncertainty (EPU), on monthly data for 27 countries, 1985–2016. Third, we identify some new stylized facts based on international evidence. While different measures are surprisingly lowly correlated on average in each country, they are typically highly positively correlated across countries, suggesting the existence of a global factor or sizeable international spillovers of sentiment. Consumer confidence has the closest co‐movement with economic and financial variables, and most of the correlations are contemporaneous or forward‐looking, consistent with the view that economic sentiment is indeed a driver of activity.

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Section: Literaturementioning

confidence: 99%

More Than a Feeling: Confidence, Uncertainty, and Macroeconomic Fluctuations

Nowzohour

Stracca

2020

Journal of Economic Surveys

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“…Expectations are closely linked to decision-making process of both businesses and households, thus determining the financial market volatility and economic activity. Recent research on animal spirits, fundamental factors and business cycle fluctuations (Dées and Zimic, 2016) empirically proved that expecting errors of economic agents can explain almost half of business cycle fluctuations in the short term, while technology shocks explain only up to 20 percent of output variations. Substantial impact of non-fundamental factors -of psychological (behavioral) origin in particular -on business dynamics is evidenced by recent economic research.…”

Section: Introductionmentioning

confidence: 99%

Financial, business and trust cycles: the issues of synchronization

Bilan¹,

Brychko²,

Buriak³

et al. 2019

Zb. rad. Ekon. fak. Rij.

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Starting from 1920, the growing body of research has been focused on the role of psychological factors in cycle theories. Mainstream macroeconomic models are insufficient for exploring interaction among economic agents, financial institutions, and the real sector of economy. This paper is among the first to show the synchronization of financial and business cycles through the trust cycle but with a certain delay in terms. The paper presents the conceptualization of trust as a combination of two pillars-structure-based confidence based on objective information about system competences, regulations, and norms, and sentimentdriven actions of economic agents (feelings, emotions, and other subjective characteristics). The paper offers a theoretical descriptive model of a trust cycle that allows exploring several stages of correlation between financial fluctuations, trust changes, and large swings in business cycle.

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“…In contrast, Starr (2012) found a positive, small, and significant effect of sentiment on spending after filtering out shifts in sentiment due to exogenous shifts in news coverage. Similarly, Blanchard et al (2013), Dées and Zimic (2019), and Öztürk and Stokman (2019) showed that animal spirit exists and may have a considerable impact on spending growth in Europe and the United States.…”

Section: Introductionmentioning

confidence: 92%

The role of consumer confidence in forecasting consumption, evidence from Florida

Sandoval

Walsh

2021

Southern Economic Journal

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Consumers' attitudes about the direction of the economy influence their decisions about discretionary purchases, saving, and investment. This paper uses data from Florida's consumer sentiment index to study the role and accuracy of consumer confidence in forecasting consumption, as well as the mechanism behind such a relationship. Spending on durable goods tends to be more discretionary in nature and it is frequently done using credit, thus potentially more sensitive to changes in consumer attitudes. Our results indicate that the in‐sample predictive power of the index and its questions is limited to predicting spending on durable goods, particularly, on autos. Furthermore, consumer confidence does not improve the out‐of‐sample forecast beyond the forecast from a baseline model, which considers economic fundamentals. Finally, the evidence shows that the relationship between shocks in consumer confidence and economic activity arises because confidence measures contain information about the state of the economy, thus rejecting animal spirits.

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Animal spirits, fundamental factors and business cycle fluctuations

Cited by 8 publications

References 15 publications

More Than a Feeling: Confidence, Uncertainty, and Macroeconomic Fluctuations

More Than a Feeling: Confidence, Uncertainty, and Macroeconomic Fluctuations

Financial, business and trust cycles: the issues of synchronization

The role of consumer confidence in forecasting consumption, evidence from Florida

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