Consumption, sentiment, and economic news

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Consumption, sentiment, and economic news

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Title: Consumption, sentiment, and economic news
Author: Starr, Martha
Abstract: 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 non-fundamental factors in aggregate fluctuations.
Description: Working Paper No. 2008-16. 30 pages.
URI: http://hdl.handle.net/1961/5041
Date: 2008-09


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