More than a Feeling: Confidence, Uncertainty and Macroeconomic Fluctuations

Nowzohour, Laura; Stracca, Livio

doi:10.2139/ssrn.3036817

Cited by 29 publications

(12 citation statements)

References 42 publications

(57 reference statements)

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“…A wealth of economic studies demonstrate that feelings are central to changes in consumption patterns. Bozzoli, Brueck, and Muhumuza (2011) show how conflict results in negative expectations about future economic performances; in turn, optimism or pessimism of households about future prospects crucially drive variations in consumption (Carroll, Fuhrer, and Wilcox 1994; Nowzohour and Stracca 2020). Not only psychological distress reduces labor supply and consumption (de Quidt and Haushofer 2017), but pessimism about future opportunities may become self‐enforcing and entangles individuals in a“vicious cycle of pessimism, hopelessness, and persistent poverty” (Moya and Carter 2014, p. 2).…”

Section: Theoretical Frameworkmentioning

confidence: 99%

UN Peacekeeping and Households' Well‐Being in Civil Wars

Bove

Salvatore

Elia

2021

American J Political Sci

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Civil wars affect the economic conditions of households by disrupting economic transactions and harming their psychological well‐being. To restore basic conditions for local economic recovery in conflict‐torn regions, the international community has only a limited number of tools at its disposal. We ask whether UN peacekeeping is one instrument to mitigate the negative effect of conflict on households' economic well‐being. We argue that, by reducing violence and heightening perceptions of safety, UN missions (i) encourage labor provision and economic exchanges, and (ii) instill confidence by reducing the psychological impact of daily stressors. Combining high‐frequency household survey data and information on subnational deployment of UN peacekeepers in South Sudan, we show that peacekeepers' military presence improves security (observed and perceived), which in turn revitalizes local economies and households' subjective well‐being. These improvements ultimately boost households' consumption, partially countering the negative effect of ongoing civil wars by keeping local communities' economy afloat.

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Section: Theoretical Frameworkmentioning

confidence: 99%

UN Peacekeeping and Households' Well‐Being in Civil Wars

Bove

Salvatore

Elia

2021

American J Political Sci

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“…All have been used extensively in the relevant academic literature ( inter alia : Aloui and Hamida, 2021; Hadzi-Vaskov et al. , 2021; Kyriazis and Economou, 2021; Nowzohour and Stracca, 2020). The RSU index used herein was initially featured in IMF's Regional Economic Outlook for Middle East and Central Asia in April and October 2019 [1].…”

Section: Social Unrest and Growth Rates: A Comparative Descriptive Pr...mentioning

confidence: 99%

“…Other such indices that rely on text search methods include the Caldara and Iacoviello (2019) Geopolitical Risk Index, the Baker et al (2016) Economic Policy Uncertainty Index. All have been used extensively in the relevant academic literature (inter alia: Aloui and Hamida, 2021;Hadzi-Vaskov et al, 2021;Kyriazis and Economou, 2021;Nowzohour and Stracca, 2020). The RSU index used herein was initially featured in IMF's Regional Economic Outlook for Middle East and Central Asia in April and October 2019 [1].…”

Section: Social Unrest and Economic Growthmentioning

confidence: 99%

The nexus between social unrest and economic growth in Middle East and Central Asia countries

Kollias

2022

REPS

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Purpose Conflict and civil strife adversely affect the economy since it severely disrupts the normal, daily routine of economic activity. Similarly, economic downturns can trigger discontent that has the potential to escalate into social unrest and strife. Using the recently compiled index on social unrest (RSUI) of Barrett et al. (2020), the paper sets out to examine the nexus between economic growth and social unrest in the case of 29 Middle East and Central Asia countries over the period 2000–2018.Design/methodology/approach To probe into the issue at hand, the paper adopts a panel causality approach. To this effect, two panel causality tests are used. The first is the heterogeneous panel causality model proposed by Dumitrescu and Hurlin (2012) is employed. The second panel Granger causality test is the frequency domain causality test constructed by Breitung and Candelon (2006) and extended for panel testing by Croux and Reusens (2013).Findings The results of the causality tests indicate a strong bidirectional nexus between civil unrest and economic growth. The findings support the contention that civil strife adversely affects economic performance and economic downturns can trigger discontent and unrest.Research limitations/implications Albeit consistent and robust, the results reported herein concern the specific sample of countries under scrutiny. Extending the analysis to other groups of countries will offer better insights into the nexus between civil unrest and economic performance.Originality/value To the best of the authors’ knowledge, the present paper is the first to address the nexus between social unrest and economic growth for this group of countries using the recently compiled index on social unrest (RSUI).

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“…First, it should be clearly stated that no formal mapping can be applied here. This is because sentiments do not have a unique definition in the literature, they usually denote beliefs about future economic developments that may result in economic fluctuations (see Nowzohour & Stracca, 2020 for a discussion). Having this in mind, we have two arguments in favor of identifying noise with sentiments.…”

Section: Noise Sentiments and Spilloversmentioning

confidence: 99%

International information flows, sentiments, and cross‐country business cycle fluctuations

Brzoza‐Brzezina

Kotłowski

Wesołowski

2022

Rev International Economics

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Business cycles are strongly correlated between countries. One possible explanation (beyond traditional economic linkages like trade or finance) is that consumer or business sentiments spread over boarders and affect cyclical fluctuations in various countries. We first lend empirical support to this concept by showing that sentiments travel between countries at a speed much higher than can be explained by traditional linkages. Then we construct a two-economy new Keynesian model where noisy international information can generate cyclical fluctuations (comovement of GDP, consumption, investment and inflation) in both countries. Estimation with US and Canadian data reveals a significant role of international noise shocks in generating common fluctuations -they explain between 15-30% of consumption variance in the US and Canada and raise the correlation between these variables by up to unity in periods of sentiment breakdowns.We also show that our estimated noise shock has a clear interpretation as a sentiment shock.

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More than a Feeling: Confidence, Uncertainty and Macroeconomic Fluctuations

Cited by 29 publications

References 42 publications

UN Peacekeeping and Households' Well‐Being in Civil Wars

UN Peacekeeping and Households' Well‐Being in Civil Wars

The nexus between social unrest and economic growth in Middle East and Central Asia countries

International information flows, sentiments, and cross‐country business cycle fluctuations

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