Spontaneous fluctuations (SF) in skin conductance are often used to index sympathetic arousal and emotional states. SF are caused by sudomotor nerve activity (SNA), which is a direct indicator of sympathetic arousal. Here, we describe a dynamic causal model (DCM) of how SNA causes SF, and apply variational Bayesian model inversion to infer SNA, given empirically observed SF. The estimated SNA bears a relationship to the number of SF as derived from conventional (semi-visual) analysis. Crucially, we show that, during public speaking induced anxiety, the estimated number of SNA bursts is a better predictor of the (known) psychological state than the number of SF. We suggest dynamic causal modeling of SF potentially allows a more precise and informed inference about arousal than purely descriptive methods.