This website uses cookies.

By clicking the "Accept" button or continuing to browse our site, you agree to first-party and session-only cookies being stored on your device to enhance site navigation and analyze site performance and traffic. For more information on our use of cookies, please see our Privacy Policy.

  1. Home
  2. Journals
  3. American Economic Review
  4. June 2012
  5. Information, Animal Spirits, and the Meaning of Innovations in Consumer Confidence

American Economic Review

ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)

Information, Animal Spirits, and the Meaning of Innovations in Consumer Confidence

  • Robert B. Barsky
  • Eric R. Sims
American Economic Review
vol. 102, no. 4, June 2012
(pp. 1343–77)
Download Full Text PDF

Abstract

Innovations to consumer confidence convey incremental information about economic activity far into the future. Does this reflect a causal effect of animal spirits on economic activity, or news about exogenous future productivity received by consumers? Using indirect inference, we study the impulse responses to confidence innovations in conjunction with an appropriately augmented New Keynesian model. While news, animal spirits, and pure noise all contribute to confidence innovations, the relationship between confidence and subsequent activity is almost entirely reflective of the news component. Confidence innovations are well characterized as noisy measures of changes in expected productivity growth over a relatively long horizon. (JEL D12, D83, D84, E12)

Citation

Barsky, Robert B., and Eric R. Sims. 2012. "Information, Animal Spirits, and the Meaning of Innovations in Consumer Confidence." American Economic Review, 102 (4): 1343–77. DOI: 10.1257/aer.102.4.1343

Additional Materials

JEL Classification

  • D12 Consumer Economics: Empirical Analysis
  • D83 Search; Learning; Information and Knowledge; Communication; Belief
  • D84 Expectations; Speculations
  • E12 General Aggregative Models: Keynes; Keynesian; Post-Keynesian