I am grateful to an anonymous referee for valuable comments on an earlier version of this paper.
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CONSUMPTION, SENTIMENT, AND ECONOMIC NEWS
Article first published online: 15 DEC 2010
DOI: 10.1111/j.1465-7295.2010.00346.x
© 2010 Western Economic Association International
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How to Cite
STARR, M. A. (2012), CONSUMPTION, SENTIMENT, AND ECONOMIC NEWS. Economic Inquiry, 50: 1097–1111. doi: 10.1111/j.1465-7295.2010.00346.x
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I am grateful to an anonymous referee for valuable comments on an earlier version of this paper.
Publication History
- Issue published online: 4 OCT 2012
- Article first published online: 15 DEC 2010
- Abstract
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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)