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CONSUMPTION, SENTIMENT, AND ECONOMIC NEWS
Author(s) -
STARR MARTHA A.
Publication year - 2012
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/j.1465-7295.2010.00346.x
Subject(s) - economics , vector autoregression , unemployment , consumption (sociology) , structural vector autoregression , aggregate (composite) , consumer confidence index , econometrics , consumer spending , monetary economics , shock (circulatory) , macroeconomics , recession , monetary policy , medicine , social science , materials science , sociology , composite material
This paper investigates the influence of economic news on consumer sentiment, and examines whether “news shocks”—changes in coverage that would not be expected from incoming data on economic fundamentals—have aggregate effects. Using monthly U.S. data and a structural vector autoregression, I find that (1) sentiment is affected by news shocks; (2) after filtering out effects of news shocks, shocks to sentiment still have positive effects on consumer spending; and (3) news shocks influence both spending and unemployment in significant, though transitory ways. These results are consistent with other evidence of a role of nonfundamental factors in aggregate fluctuations. ( JEL E21, E32, D12)