the just price three insights from the salamanca school in the sixteenth and seventeenth centuries members of the salamanca school engaged in a sustained and sophisticated discussion of the issue of just prices this article uses their contribution as a point of departure for a consideration of justice in pricing which will be relevant to current day circumstances the key theses of members of this school were that fairness of exchanges should be assessed objectively that the fair price of an article is one equal to its value and that the best indicator of that value is the price that article commonly fetches in an open market this article tries to bring to light the attractiveness of those views in order to guide current practice by contrasting them with alternative views showing their connection with intuitively attractive basic standards and linking them to commonly shared intuitions

price flexibility in developing countries evidence and implications using data for a sample of 50 developing countries the empirical investigation evaluates determinants and implications of asymmetric price flexibility price inflation is characterized by high flexibility to adjust towards full equilibrium further price inflation accelerates flexibly with unanticipated demand growth in both the upward and downward directions in most of the countries under investigation asymmetry indicates higher upward flexibility compared to downward flexibility in many countries aggregate uncertainty determines the degree of asymmetry such that price flexibility is higher with respect to expansionary demand shocks compared to contractionary shocks the higher the variability of aggregate demand across countries in contrast higher trend price inflation increases downward price flexibility across countries output variability decreases with both upward and downward price flexibility in the face of aggregate demand shocks a the views expressed in this article are those of the a

instability of sunspot equilibria in real business cycle models under adaptive learning we examine the stability of equilibrium in sunspot driven real business cycle rbc models under adaptive learning we show that the general reduced form of this class of models can admit rational expectations equilibria that are both indeterminate and stable under adaptive learning indeterminacy of equilibrium allows for the possibility that non fundamental sunspot variable realizations can serve as the main driving force of the model and several researchers have put forward calibrated structural models where sunspot shocks play such a role we show analytically how the structural restrictions that researchers have imposed on this type of model lead to reduced form systems where equilibrium is indeterminate but always unstable under adaptive learning we thereby resolve a stability puzzle identified by evans and mcgough 2002

debt and financial expectations an individual and household level analysis in this article we show that optimistic financial expectations impact positively on both the quantity of debt and the growth in debt at the individual and household levels our theoretical model shows that this association is predicted under a variety of plausible scenarios in the empirical analysis we explore the determinants of debt and of growth in debt using british data we find convincing support for our theoretical priors and show that it is optimistic financial expectations per se that are important in influencing debt rather than the accuracy of individuals predictions regarding their future financial situation jel d18 d84 d91

long run inflation expectations in the shrinking upper tail abstract consumer inflation expectations are highly disperse with some households reporting very high inflation forecasts in recent years disagreement in longer run inflation expectations has fallen reflecting compression in the upper part of the distribution the 75th percentile of the distribution of longer run inflation forecast has fallen 0 21 percentage points per year since 2012 and is at an all time low i show that the decline in long run inflation expectations at the upper end of the distribution seems to reflect improvement in consumers general economic sentiment rather than stronger anchoring of inflation expectations

a composite leading indicator of the inflation cycle for the euro area we evaluate the performance of composite leading indicators of turning points of inflation in the euro area constructed by combining the techniques of fourier analysis and kalman filters with the national bureau of economic research methodology in addition the study compares the empirical performance of euro simple sum and divisia monetary aggregates and provides a tentative answer to the issue of whether or not the uk should join the euro area our findings suggest that first the cyclical pattern of the different composite leading indicators very closely reflect that of the inflation cycle for the euro area second the empirical performance of the euro divisia is better than its simple sum counterpart and third the uk is better out of the euro area 2005 taylor francis group ltd

multiple solution indeterminacies in monetary policy analysis abstract a sizeable fraction of recent research on monetary policy has been concerned with issues relating to analytical indeterminacies i e multiple solutions in rational expectations re models most of the literature features sophisticated re analysis conducted within dynamic models that reflect optimizing behavior by individual agents and incorporate taylor style policy rules a few papers have suggested that some of the particular indeterminacy arguments are misleading or irrelevant for the most part however there has been little dissent from the position that these indeterminacies present a genuine problem for monetary policy makers the purpose of the present paper by contrast is to argue that conclusions based on multiple solution indeterminacy findings are of dubious merit rather generally

expected and realized income changes evidence from the dutch socio economic panel abstract income expectations play a central role in household decision making in the life cycle model for example consumption and savings decisions reflect expectations of future income in empirical applications where direct information on expectations is not available it is usually assumed that expectations are rational and reflected by observed future realizations in this paper we analyze direct subjective information on expected changes of household income in one panel wave of dutch families first we describe these data and investigate how the expectations can be explained by among other variables income changes in the past second we combine these data with information on realized income changes in the next panel wave and analyze the differences between expected and realized changes we find that on average households underestimate their future income changes significantly in particular this holds for those families whose income has fallen in the past

the effects of exports aid and remittances on output the case of kiribati country specific time series models of the determinants of output for the small developing island countries in the pacific region are relatively few this article explores the applicability of the framework underlying solow 1956 to analyse the determinants output in kiribati for the period 1970 to 2005 it is found that technical progress in kiribati has been negative virtually offsetting the positive effects of factor accumulation aid and remittances have negative effects and exports have only a small positive effect in the short run

the effects of oil supply and demand shocks on u s consumer sentiment this paper investigates how the university of michigan s index of consumer sentiment responds to oil price shocks while oil supply shocks play only a limited role the effect of aggregate demand shocks is positive for the first few months and negative thereafter a typical other oil demand shock has a significant negative impact for up to 2 years by studying the responses of individual survey questions we find that expectations of future inflation and a change in real household income as well as perceived vehicle and house buying conditions are the main transmission channels of oil supply and demand shocks

does consumer sentiment forecast household spending if so why in the three months following the iraqi invasion of kuwait the university of michigan s index of consumer sentiment ics fell an unprecedented 24 3 index points to its lowest level since the 1981 1982 recession this collapse in household confidence became the focus of a great deal of economic commentary and indeed frequently was cited as an important if not the leading cause of the economic slowdown that ensued concern was fueled by the well known contemporaneous correlation between the ics and the growth of household spending figure 1 shows quarterly averages of the index 1978 1993 together with the quarterly growth in real personal consumption expenditures as measured in the national income accounts bureau of economic analysis the correlation is impressive of course it is not surprising that sentiment and the growth of spending are positively correlated this correlation may simply reflect that when economic prospects are poor households curtail their spending and also give gloomy responses to interviewers thus the contemporaneous correlation between sentiment and spending does not refute traditional life cycle or permanentincome models of consumption nor does it necessarily make the job of forecasting changes in consumption any easier from the point of view of an economic forecaster the questions of interest are first whether an index of consumer sentiment has any predictive power on its own for future changes in consumption spending and second whether it contains information about future changes in consumer spending aside from the information contained in other available indicators in section i we present evidence that the answer to the first question is a clear yes we find that lagged values of the ics taken on their own explain about 14 percent of the variation in the growth of total real personal consumption expenditures over the post1954 period further investigation shows that the answer to the second question is probably yes as well though here the margin is narrower and the evidence more murky the ics contributes about 3 percent to the r2 of a simple reduced form equation for total personal consumption expenditures in the longer of the two sample periods we examine but nothing in the shorter sample period though the latter result is heavily influenced by the observation for 1980 2 for the major subcategories of spending the contribution generally ranges between 1 percent and 8 percent overall we read the evidence as pointing toward at least some significant incremental explanatory power therefore we take as given for the remainder of the paper that sentiment forecasts spending and we turn to the issue of how that statistical relationship should be interpreted one possible interpretation is that sentiment is an independent driving factor in the economy and that changes in carroll division of research and statistics stop 80 federal reserve board washington dc 20551 fuhrer research department federal reserve bank of boston boston ma 02106 wilcox division of monetary affairs stop 71 federal reserve board washington dc 20551 we have benefited from the research assistance of stephen helwig and christopher geczy and the comments of an anonymous referee the views expressed in this paper are those of the authors and not of the federal reserve board the federal reserve bank of boston or the other members of the staff of either institution ithe conference board s consumer confidence index also plunged at the same time

co integration and error correction models the temporal causality between government taxes and spending several interesting papers have recently considered whether government taxes granger cause government spending or vice versa the findings based on standard granger 6 causality tests are not consistent manage and marlow 10 conclude that when evidence of one way causality exists federal taxes granger cause federal spending while anderson wallace and warner 1 conclude that the evidence supports one way causality in the opposite direction ram 11 reexamining the issue concludes that taxes granger cause spending at the federal level but that spending granger causes taxes at the state and local level von furstenberg green and jeong 13 in another related article examine the tax and spend spend and tax causality issue using a more general vector autoregressive var model they introduce in addition to federal taxes and spending two economic variables the gnp gap and the inflation rate decompose federal spending into several categories and remove the effects of automatic stabilizers when appropriate they find little evidence that taxes granger cause spending and limited evidence that spending causes taxes a finding which corresponds most closely to that of anderson wallace and warner 1 our purpose is to reconsider the causality issue with the aid of co integration and errorcorrection modeling our analysis illustrates with a specific example how sources of causality can be neglected in standard granger causality tests moreover addressing the question of temporal causality between government taxes and spending provides insight as to how different policies might or might not help control the growth of government the results of our estimating various co integration and error correction models with quarterly data suggest bi directional causality between government taxes and spending both for the federal and state and local sectors this finding counters the conclusions of previous studies when annual data are used however our

rational forecasts or social opinion dynamics identification of interaction effects in a business climate survey this paper develops a methodology for estimating the parameters of dynamic opinion or expectation formation processes with social interactions we study a simple stochastic framework of a collective process of opinion formation by a group of agents who face a binary decision problem the aggregate dynamics of the individuals decisions can be analyzed via the stochastic process governing the ensemble average of choices numerical approximations to the transient density for this ensemble average allow the evaluation of the likelihood function on the base of discrete observations of the social dynamics this approach can be used to estimate the parameters of the opinion formation process from aggregate data on its average realization our application to a well known business climate index provides strong indication of social interaction as an important element in respondents assessment of the business climate

forecasting uk commercial real estate cycle phases with leading indicators a probit approach this paper examines the significance of widely used leading indicators of the uk economy for predicting the cyclical pattern of commercial real estate performance the analysis uses monthly capital value data for uk industrials offices and retail from the investment property databank ipd prospective economic indicators are drawn from three sources namely the series used by the us conference board to construct their uk leading indicator and the series deployed by two private organisations lombard street research and ntc research to predict uk economic activity we first identify turning points in the capital value series adopting techniques employed in the classical business cycle literature probit models are then estimated using the leading economic indicators as independent variables and forecast the probability of different phases of capital values that is periods of declining and rising capital values the forecast performance of the models is tested and found to be satisfactory the predicta

fiscal shocks and real exchange rate dynamics some evidence for latin america this paper analyses the effects of fiscal shocks using a two country macroeconomic model for output labour input government spending and relative prices which provides the orthogonality restrictions for obtaining the structural shocks dynamic simulation techniques are then applied in particular to shed light on the possible effects of fiscal imbalances on the real exchange rate in the case of six latin american countries using quarterly data over the period 1980 2006 we find that in a majority of cases fiscal shocks are the main driving force of real exchange rate fluctuations

international travelling and trade further evidence for the case of spanish wine based on fractional vector autoregressive specifications this article deals with the relationship between international travelling and trade for this purpose we focus on a particular case study the connection between the spanish wine exports to germany and the german travellers to spain unlike previous studies we use a methodology based on fractional vector autoregressive var models which permits us to compute the impulse responses in a similar way as in the standard var case the results show that the orders of integration of the two series are constrained between 0 and 1 being higher for the arrivals series than for the exports the impulse response analysis reveals that an increase in travelling produces a positive initial impact on trade though it tends to disappear in the long run

assessing the energy implications of replacing car trips with bicycle trips in sheffield uk a wide range of evidence supports policies which encourage people to cycle more and drive less for health and environmental reasons however the likely energy implications of such a modal shift have remained relatively unexplored in this paper we generate scenarios for increasing the cycling rate in sheffield between 2010 and 2020 this is done through the novel application of a simple model borrowed from population ecology the analysis suggests that pro cycling interventions result in energy savings through reduced consumption of fuel and cars and energy costs through increased demand for food the cumulative impact is a net reduction in primary energy consumption the magnitude of which depends on a number of variables which are subject to uncertainty based on the evidence presented and analysed in this paper we conclude that transport policy has a number of important energy implications some of which remain unexplored we therefore advocate the formation of closer links between energy policy and transport policy in academia and in practice our approach provides a simple yet flexible framework for pursuing this aim in the context of modal shift

consumer sentiment and consumer spending decomposing the granger causal relationship in the time domain it is often believed that the consumer sentiment index has predictive power for future consumption levels while granger causality tests have already been used to test for this no attempt has been made yet to quantify the predictive power of the consumer sentiment index over different time horizons in this article we decompose the granger causality at different time lags by looking at a sequence of nested prediction models since the consumer sentiment index turns out to be cointegrated with real consumption we resort to error correcting models four consumption series are studied namely total real consumption real consumption of durables non durables and services among other findings we show that the consumer sentiment index granger causes future consumption with an average time lag of 4 5 months furthermore it is found that the consumer sentiment index has more incremental predictive power for consumption of services than for consumption of durables or non durables and that the index is not

the stock market and consumer confidence european evidence this paper studies the short run relationship between stock market developments and consumer confidence in eleven european countries over the years 1986 2001 we find that stock returns and changes in sentiment are positively correlated for nine countries with germany as the main exception moreover stock returns generally granger cause consumer confidence at very short horizons two weeks to one month but not vice versa the stock market confidence relationship is driven by expectations about economy wide conditions rather than personal finances this suggests that the confidence channel is not part of the conventional wealth effect but a separate transmission channel

international evidence on sticky consumption growth abstract this paper estimates the degree of stickiness in aggregate consumption growth sometimes interpreted as reflecting consumption habits for thirteen advanced economies we find that after controlling for measurement error consumption growth has a high degree of autocorrelation with a stickiness parameter of about 0 7 on average across countries the sticky consumption growth model outperforms the random walk model of hall 1978 and typically fits the data better than the popular mankiw 1989 model though in a few countries the sticky consumption growth and campbell mankiw models work about equally well

testing for indeterminacy an application to u s monetary policy reply this paper considers a prototypical new keynesian model in which the equilibrium is undetermined if monetary policy is passive the likelihood based estimation of dynamic equilibrium models is extended to allow for indeterminacies and sunspot fluctuations we construct posterior weights for the determinacy and indeterminacy region of the parameter space and estimates for the propagation of fundamental and sunspot shocks according to the estimated model u s monetary policy post 1982 is consistent with determinacy whereas the pre volcker policy is not we find that before 1979 indeterminacy substantially altered the propagation of shocks

what makes a good economy evidence from public opinion surveys analysis of 35 years of previously unstudied survey data shows how the american public evaluates the health of the macroeconomy survey responses are multidimensional distinct from indexes of consumer sentiment and based mostly on genuine perceptions of economic conditions not media reports of economic statistics as such they contain unique information about current and future values of these statistics particularly consumption growth a longstanding focus of the literature both intangibles and macroeconomic fundamentals explain substantial variation in the survey data the public equates 2 to 5 percentage points of inflation with 1 percentage point of unemployment jel e32 e27 eo1 i introduction traditional business cycle measurement and theory tends to downplay the role of public perceptions the health of the macroeconomy is evaluated with a lag through formal measurement of fundamentals like gross domestic product gdp growth rather than by the opinion of the public the objective functions employed by models of macro policy derived from theory or prescribed ad hoc are similarly unshaped by public opinion on the attractiveness of various states of the economy for a profession that is enamored of consumer sovereignty and cognizant of the value of idiosyncratic decentralized information this is a little surprising it probably reflects in part a lack of available data in the united states prior research on the macroeconomic perceptions of the public has almost exclusively employed the widely available michigan index of consumer sentiment or its counterpart from the conference board the consumer confidence index to predict future consumption but these measures are not intended to be and have not been interpreted as general assessments of the national macroeconomy they combine responses to a variety of questions about personal finances and the macroeconomy about employment consumption and profitability about current conditions and the change in those conditions these questions are sufficiently disparate that it is unclear what exactly either index measures or how it should be interpreted see merkle langer and sussman 2004 this ambiguity has probably contributed to a decades long debate over the usefulness of such indices which has been compounded by divergent findings on their ability to forecast future consumption see golinelli and parigi 2004 manski 2004 to surmount these data limitations 35 years of responses were assembled from three reputable national u s polls that ask about the current state of the national economy and or whether economic conditions are getting better or worse all are conceptually and we show statistically distinct from indexes of consumer sentiment and none has been previously studied as shown in this article these poll data enrich our understanding of the business cycle in three ways they contain information about fundamental macroeconomic variables which are reported with a lag and often subsequently revised they establish the role of various macroeconomic fundamentals and of intangibles in determining the public s satisfaction with the economy which informs policy and suggests simple summary measures of economic conditions and they reveal the multifaceted nature of consumers macroeconomic perceptions which span four dimensions across a total of nine survey questions section ii introduces these surveys and shows how they relate to each other and to the michigan and conference board indices in section iii we examine how macroeconomic conditions influence the assessments reported therein their predictive power is examined in section iv section v concludes ii polling on the state of the economy for decades american news organizations have asked respondents to assess the national macroeconomy table 1 lists the questions time spans sample periods and response options for each

consumer confidence and rational expectations are agents beliefs consistent with the theory consumer confidence is found to have predictive content for a wide range of macroeconomic variables including consumption growth contrary to standard repih we find that on uk data the repih is rejected due to the predictive content of consumer confidence and not labour income we explain this finding in terms of precautionary behaviour extending the hansen and singleton consumption capm model to allow a conditional variance we find a high level of confidence is associated with both greater optimism about the level of consumption and greater uncertainty about the forecaster variance once allowance is made for time aggregation the over identifying restrictions implied by this model are accepted we estimate a small but statistically significant intertemporal elasticity of substitution

confidence and the real economy the japanese case this paper empirically analyses whether consumer confidence has an effect on the real economy in japan this paper uses vector autoregressions including variables which represent consumer confidence it is shown that in the cases of quarterly and monthly data consumer confidence has a significant effect on gdp fluctuations whereas in the case of semiannual data it has no effect in other words consumer confidence has an effect on only short term economic fluctuations

the usefulness of consumer confidence in forecasting household spending in canada a national and regional analysis i introduction in 1960 the conference board of canada launched its series of quarterly surveys of consumer attitudes since then the results of these surveys have provided policy makers economic forecasters and business managers with useful information on future economic trends the increasing demand for the survey results both by the public and the business sectors as well as the expanding coverage given to them in the media appear to confirm their popularity and usefulness to better gauge consumer sentiment the conference board of canada also designed the index of consumer attitudes ica for the entire nation as well as for the five canadian regions the atlantic provinces quebec ontario the prairies and british columbia 1 the ica is derived from answers to four attitudinal questions contained in the survey of consumer attitudes because two of these four questions relate to the respondent family s economic prospects over the next six months and to the employment prospects for the community over the next six months the index is widely thought to reflect consumer expectations with respect to future economic conditions which in turn would influence consumption behavior a number of empirical studies have investigated the effectiveness of indices of consumer confidence as leading indicators of consumer spending in canada an early paper by shapiro and angevine 1969 finds that the composite index of consumer mood derived from the financial post s quarterly survey of consumer buying intentions is a very useful tool for predicting consumer spending on durable goods 2 in a follow up study angevine 1974 also finds that measures of consumer mood based on the financial post s survey are statistically significant explanatory variables for three consumption categories nondurable goods semidurable goods and services rayfuse 1982 reports that consumer sentiment as captured by the ica tends to lead movements in consumer expenditures on durable goods by one quarter 3 more recently cote and johnson 1998 examine whether the ica improves the fit of a consumption equation that includes other macroeconomic variables they find that inclusion of the ica improves the explained variation in growth in consumer expenditures per capita by 18 percentage points 4 the purpose of our article is to provide a fresh empirical perspective on the effect of consumer confidence on household spending in canada although past studies confine their attention to national data the present investigation examines the ability of the ica as well as the individual attitudinal questions used in the survey to forecast canadian household spending not only nationwide but also at a regional level to our knowledge our study represents the first endeavor in the literature to assess the usefulness of regional consumer confidence indices in forecasting household spending our work also employs significantly extended time series for the various components of consumer expenditure used in previous canadian studies employing the results of the conference board of canada s survey of consumer attitudes for the sample period 1979q4 2001q4 our empirical findings indicate that at the national level the ica is a reliable predictor of total personal consumption expenditures as well as of various subcategories of consumer spending in the presence of control variables on the other hand our regional results are quite diverse suggesting that economic fore casters and government policy makers should be cautious about using regional confidence indicators to predict consumption growth the remainder of this article is structured as follows section ii describes the four attitudinal questions used in the construction of the ica at both the national and the regional levels section iii discusses the econometric methodology and the data employed in our empirical analysis section iv reports the correlations between growth in total personal consumption expenditures pce and the contemporaneous ica as well as the different lags of the ica

comparative performances of measures of consumer and economic sentiment in forecasting consumption a multi country analysis this paper seeks to compare the capabilities of assorted measures of consumer and economic sentiment in predicting the growth of household expenditure an analysis of quarterly data on five europea

housing wealth and residential energy consumption abstract the housing wealth effect often manifests as a positive relationship between consumption and perceived housing wealth e g the perceived value of houses when the perceived value of a property rises homeowners may feel more comfortable and secure about their wealth causing them to spend more this study adopts a behavioural approach to verify if this relationship holds true for residential energy consumption in the uk while controlling for property characteristics and a large number of demographic socioeconomic and energy use behaviour variables we identified a significant relationship between housing wealth and energy consumption our models also considered psychological biases in energy consumption behaviours such as the framing effect our findings shed light on the behavioural aspects of housing wealth effect on residential energy consumption and demonstrate the potential to nudge households towards energy conservation most importantly we provide empirical evidence on the intriguing relationship among housing wealth residential energy consumption and fuel poverty the findings of this study are particularly helpful in designing and implementing energy consumption policies that can strike a balance between social justice and economic efficiency

forecasting consumption the role of consumer confidence in real time with many predictors summary we study the role of consumer confidence in forecasting real personal consumption expenditure and contribute to the extant literature in three substantive ways first we re examine existing empirical models of consumption and consumer confidence not only at the quarterly frequency but using monthly data as well second we employ real time data in addition to commonly used revised vintages third we investigate the role of consumer confidence in a rich information context we produce forecasts of consumption expenditures with and without consumer confidence measures using a dynamic factor model and a large real time jagged edge dataset in a robust way we establish the important role of confidence surveys in improving the accuracy of consumption forecasts manifesting primarily through the services component during the recession of 2007 2009 sentiment is found to have a more pervasive effect on all components of aggregate consumption durables non durables and services copyright 2015 john wiley sons ltd

animal spirits the effect of economic expectations on economic output the public is characterized as able forecasters of future economic performance they engage in rational expectations empirical evidence exists to bolster the claim this article considers the possibility that the public does more than predict economic output they may engage in a self fulfilling prophecy where belief about the future economy translates into personal financial behaviour e g consumption and investment that actually drives economic performance after controlling for rational expectations with elite forecasts leading indicators and past economic performance it is shown that between 5 and one third of the variance in economic output can be explained by prospective economic sentiment this result has broad implications for electoral behaviour research

an assessment of the contribution of consumer confidence towards household spending decisions using uk data the european commission s consumer confidence indicator cci is assembled from responses to four questions about individual and general economic prospects which form part of the eu s consumer survey however concerns may be raised about whether the four components should be constrained to exerting the same influence in a forecasting model of household consumption also in this context it would seem to be appropriate to permit a role to other information that is obtained from the eu survey consequently in this article different regression functions are specified in order to assess whether there is any gain to be achieved in predictive accuracy from adopting a more flexible approach towards using the data from the eu questionnaire with an emphasis upon parsimony an econometric analysis is performed in conjunction with uk quarterly data on household consumption expenditure for two categories of spending it is discovered that the quality of forecasts benefits from having undertaken disaggregation involving survey data beyond those which contribute towards the calculation of the cci indeed the respective consumption variables relating to non durable goods and durable goods excluding vehicles are seen to be associated with relatively volatile behaviour over the forecast interval 2008 2013

willingness to consume and ability to consume abstract george katona 1960 introduced the distinction between ability to buy and willingness to buy ability to buy refers to the objective factors determining actual purchases whereas willingness to buy captures subjective factors such as attitudes or moods i show that katona s theory can be reconciled easily with standard models of intertemporal utility maximization if one allows for a time varying preference parameter that is exogenous to the consumer and determined by the social environment such a willingness to consume model is tested against standard alternatives using data from seven european countries the empirical evidence rejects the permanent income hypothesis and supports the willingness to consume model

socioeconomic status and macroeconomic expectations we show that individuals macroeconomic expectations are influenced by their socioeconomic status ses people with higher income or higher education are more optimistic about future macroeconomic developments including business conditions the national unemployment rate and stock market returns the spread in beliefs between high and low ses individuals diminishes significantly during recessions a comparison with professional forecasters and historical data reveals that the beliefs wedge reflects excessive pessimism on the part of low ses individuals ses driven expectations help explain why higher ses individuals are more inclined to invest in the stock market and more likely to consider purchasing homes durable goods or cars received november 13 2017 editorial decision february 12 2019 by editor wei jiang authors have furnished an internet appendix which is available on the oxford university press web site next to the link to the final published paper online

indeterminacy aggregate demand and the real business cycle abstract we show that under indeterminacy aggregate demand shocks are able to explain not only aspects of actual fluctuations that standard rbc models predict fairly well but also aspects of actual fluctuations that standard rbc models cannot explain such as the hump shaped trend reverting impulse responses to transitory shocks found in us output cogley and nason am econom rev 85 1995 492 the large forecastable movements and comovements of output consumption and hours rotemberg and woodford am econom rev 86 1996 71 and the fact that consumption appears to lead output and investment over the business cycle indeterminacy arises in our model due to capacity utilization and mild increasing returns to scale

capacity utilization under increasing returns to scale abstract this paper overcomes an important objection against the empirical relevance of the benhabib farmer model as a potential account of actual business cycle fluctuations this is attributable to an elasticity effect and a returns to scale effect of capacity utilization these effects are closely related to the empirical puzzles that capital appears to play an insignificant role in explaining cyclical movements in output and that the estimated labor elasticity appears to be larger than labor s share due to these effects multiple equilibria and persistent fluctuations can easily occur in a growth model for externalities mild enough so that the aggregate labor demand curve is downward sloping analyses show that the propagation mechanism generated by capacity utilization under mild increasing returns is capable of explaining the periodic patterns of u s business cycles documented by watson journal of economic literature classification numbers e32 e22 c52

can households see into the future survey evidence from the netherlands abstract this paper presents new evidence on the expectation formation process from a dutch household survey households become too optimistic about their future income after their income has improved consistent with the overextrapolation of their experience we show that this effect of experience is persistent and that households overextrapolate income losses more than income gains furthermore older households overextrapolate more suggesting that they did not learn over time to form more accurate expectations finally we study the relationship between expectation errors and consumption we find that more overoptimistic households intend to consume more and subsequently report higher consumption even though they do not consume as much as they intended to these results suggest that overextrapolation hurts consumers and amplifies business cycles

do shocks to animal spirits cause output fluctuations we evaluate whether shocks to animal spirits affect real outcomes at business cycle frequencies using data on consumer confidence and region and state level coincident activity indexes in a vector autoregression var with long run restrictions we assume that animal spirits shocks do not affect the long run level of activity innovations in fundamentals explain most variation in the level of activity but animal spirits have economically significant effects at business cycle frequencies a positive innovation in animal spirits causes real activity to rise by between 0 2 and 0 6 in the medium term and animal spirits may explain up to about half of real fluctuations in the medium run

expectations heterogeneous forecast errors and consumption micro evidence from the michigan consumer sentiment surveys the household data underlying the michigan index of consumer sentiment are used to test the rationality of consumer expectations and their usefulness in forecasting expenditure the results can be interpreted as characterizing the shocks that hit different types of households over time expectations are found to be biased and inefficient at least ex post people underestimated the disinflation of the early 1980s and the severity of recent business cycles people s forecast errors are also systematically correlated with their demographic characteristics in part because of time varying group level shocks further sentiment helps forecast consumption growth some of this rejection of the permanent income hypothesis is due to the systematic demographic components in forecast errors

evaluating threshold effects in consumer sentiment 1 introductionthe consumer sentiment index published by the university of michigan hereafter the um index is one of the two most commonly monitored measures of consumer sentiment in the united states the other one being the consumer confidence index issued by the conference board sentiment indexes which are constructed from answers to survey questions are popular with the media newspaper articles and commentaries abound following their release the analysis often confers a primary role to consumer sentiment in determining economic fluctuations the view among economists however is more equivocal as early as 1965 adams and green found that the information contained in the um index encompasses the information included in standard government statistics on employment and financial conditions many economists think that consumer sentiment is endogenous and is a reflection of current macroeconomic conditions other economists in line with keynes notion of animals spirits argue that psychological factors which are not captured by economic variables can influence consumers decisions thus the willingness to consume may be an important factor affecting consumption few studies have found that sentiment indexes have significant explanatory power once fundamental economic factors are taken into account garner 1991 and throop 1992 however performed event studies and suggested that these indexes could be helpful during major economic or political events as they then tend to diverge from a path consistent with other macroeconomic variables drawing on this literature our study provides a new evaluation of consumer sentiment as a predictor of aggregate consumer spending periods of high economic or political uncertainty are usually associated with increased volatility of consumer sentiment suggesting that large swings in sentiment could influence consumption we provide a formal assessment of this possibility by estimating a consumption function in which only large variations of sentiment affect spending we find that consumer sentiment is a statistically important determinant of consumption in periods of high uncertainty even after controlling for other determinants of consumption this article is organized as follows section 2 describes two views of consumer behavior section 3 reviews the relevant empirical literature section 4 introduces our econometric model data and estimation methods section 5 summarizes the estimation and forecasting results section 6 evaluates the predictive power of the um index within the campbell mankiw campbell and mankiw 1990 framework section 7 concludes 2 theorythis section briefly reviews the theory of consumer behavior and discusses possible links to consumer sentiment the permanent income hypothesis pih states that consumers expenditures depend on their permanent income permanent income is defined as the present value of wealth formula omitted see article image where at is the real value of the individual s nonhuman wealth at the beginning of period t is the discount factor ylt is real disposable labor income and et is the expectation operator conditional on information available to the individual at time t campbell and mankiw 1990 test hall s 1978 random walk hypothesis by separating consumers into two groups a proportion of households rule of thumbers simply set consumption equal to income in each period while a fraction 1 life cyclers behave according to the pih in this framework the only reason any lagged variable could have predictive power for current consumption growth is because that variable has predictive power for current income growth and the consumers do not spend that income until it arrives in that context the usefulness of consumer sentiment should come from the fact that it captures information about expected future income

growth expectations undue optimism and short run fluctuations this paper proposes a two step procedure in order to identify belief shocks shocks to expectations about the current state of the economy first we use the survey of professional forecasters to me

does customer satisfaction have directional predictability for u s discretionary spending abstractresearch indicates that past growth in customer satisfaction is an important factor in explaining the in sample behaviour of growth in discretionary spending motivated by such evidence we take an out of sample forecasting approach to examine whether customer satisfaction has directional predictability for two types of discretionary spending these include spending on motor vehicles and spending on recreation services which display frequent negative growth for the period 1995 2015 our results indicate that customer satisfaction accurately predicts the direction of change in both types of spending under symmetric loss to augment we further show that the widely reported consumer sentiment has no directional predictability for either types of discretionary spending

regional housing price cycles a spatio temporal analysis using us state level data kuethe t h and pede v o regional housing price cycles a spatio temporal analysis using us state level data regional studies a study is presented of the effects of macroeconomic shocks on housing prices in the western united states using quarterly state level data from 1988 1 to 2007 4 the study contributes to the existing literature by explicitly incorporating locational spillovers through a spatial econometric adaptation of vector autoregression spvar the results suggest these spillovers may granger cause housing price movements in a large number of cases spvar provides additional insights through impulse response functions that demonstrate the effects of macroeconomic events in different neighbouring locations in addition it is demonstrated that including spatial information leads to significantly lower mean square forecast errors kuethe t h et pede v o la variation cyclique regionale du prix du logement une analyse geographico temporelle des donnees sur les etats aux e u regional s

sharing sustainability how values and ethics matter in consumers adoption of public bicycle sharing scheme this study investigates the antecedents and mechanisms of consumers adoption of a public bicycle sharing scheme pbss as a form of shared sustainable consumption drawing on marketing ethics and sustainability literature it argues that cultural and consumption values drive or deter the adoption of pbss through the mediating mechanism of ethical evaluation this study tests its hypotheses using a sample of 755 consumers from one of the largest pbss programs in china the results confirm the significance of collectivism man nature orientation materialism and face consciousness as key determinants of the adoption of pbss interestingly these values play mixed roles in influencing pbss adoption it also finds that such values and beliefs need to be effectively translated into ethical evaluations of pbss adoption and need to be addressed in the specific social context thus ethical evaluation constitutes a cognitive strategy that allows consumers to justify and defend their adoption of sustainability practices the results suggest that a desirable sustainability program needs to not only cater to the cultural and psychological motivations of consumers but also reflect the social norms and social context in which the sustainability practices and consumers are embedded

consumption sentiment and economic news 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

federal reserve information and the behavior of interest rates this paper tests for the existence of asymmetric information between the federal reserve and the public by examining federal reserve and commercial inflation forecasts it demonstrates that the federal reserve has considerable information about inflation beyond what is known to commercial forecasters it also shows that monetary policy actions provide signals of the federal reserve s information and that commercial forecasters modify their forecasts in response to those signals these findings may explain why long term interest rates typically rise in response to shifts to tighter monetary policy jel e52 e43 d82 asymmetric information between the federal reserve and the public is a phenomenon that is often posited but rarely tested numerous models of central bank behavior for example show that the existence of asymmetric information has important implications for the effectiveness of policy and the consequences of dynamic inconsistency yet there

real time forecasting regional tourism with business sentiment surveys abstract this study provides evidence that supply side soft information retrieved from business surveys is effective in real time forecasting of hotel arrivals at the regional level we assess the effect of including business sentiment indicators in commonly used naive specifications and structural time series models using residuals and predictive diagnostics we find that both the goodness of fit and the forecasting accuracy of the augmented models are superior to those of the baseline models whence the opportunity to extend to the tourism sector the surveys on the business sentiment currently realized by the provincial chambers of commerce for the manufacturing sector allowing an effective and timely managing of local tourism market where official information is likely to be either lacking or poor in quality

the impact of conventional and unconventional monetary policy on expectations and sentiment abstract this paper offers evidence on the effect of ecb s conventional and unconventional monetary policy on economic expectations in euro area countries during the us and eu crisis we employ a range of research methodologies in a sample of nine eurozone countries and combine expectations sentiment indicators with a set of macroeconomic and financial variables we find that ecb s conventional monetary policy and fed s monetary policy stance has a positive and significant effect on economic expectations for core eurozone countries and a weak effect on peripheral eurozone countries ecb s unconventional policy measures however have a negative short term effect on core countries economic expectations this result is robust to different methodologies pvar qvar favar and different datasets overall our findings highlight the importance of monetary policy in the determination of economic expectations

the effect of customer satisfaction on consumer spending growth abstract predicting aggregate consumer spending is vitally important to marketing planning yet traditional economic theory holds that predicting changes in aggregate consumer spending is not possible previous attempts to predict consumer spending growth using standard macroeconomic predictor variables have met with little success the authors show that the lagged change in customer satisfaction which contributes to future demand has a significant impact on spending growth however this impact is moderated by increases in consumers debt service ratio a key budget constraint that affects consumers ability to spend using an asymmetric growth model more than 23 of the variation in the one quarter ahead spending growth is explained which represents a notable improvement over prior specifications

degrowth energy descent and low tech living potential pathways for increased resilience in times of crisis the use or misuse of advanced technology is a key factor driving global environmental degradation but advanced technology is also widely assumed to be the solution to many environmental problems in contrast to that dominant approach this paper outlines a variety of what the authors call low tech options such as solar shower bags washing lines alternative heating and cooling methods and cycling and raises questions about the extent to which these types of simple living practices could help increase household resilience in conditions of economic disruption instability or crisis the analysis is framed by an energy descent scenario in which an individual household or community either chooses a reduced energy way of life motivated by climate change mitigation or has such a way of life imposed upon them due to declining fossil fuel availability or economic disruption the authors see such a future as plausible and in some contexts has already arrived or has always been the case hence the relevance of this analysis which has both quantitative and qualitative dimensions furthermore while the focus herein is on low tech living at the household level it is argued that prefiguring a simpler way to live has deeper significance too in that it could help create the cultural conditions needed for a politics and macroeconomics of degrowth to emerge which the authors maintain is a necessary part of any decarbonisation project challenges facing low tech options are also acknowledged including the ever present risk of rebound effects and other indirect impacts

can consumer confidence forecast household spending evidence from the european commission business and consumer surveys 1 introductionthe analysis of the impact of consumer attitudes on consumer spending has been an area of sustained interest in the macroeconomics literature this interest in consumer attitudes reflects a popular belief that macroeconomic outcomes depend heavily on consumers expectations of future economic conditions reinforcing this belief is the fact that consumer spending accounts for 60 to 70 of the gross domestic product of highly industrialized countries such as the g 7 during the past few decades a number of single country investigations have attempted to assess the predictive power of consumer confidence in forecasting household spending for example in the united states mishkin 1978 reports that the index of consumer sentiment ics published by the university of michigan possesses good explanatory power for changes in durable goods carroll fuhrer and wilcox 1994 also find that the michigan ics has good predictive capability with regard to household expenditure but that its forecasting power decreases considerably when the index is used along with other macroeconomic variables 1 kwan and cotsomitis 2004 examine the robustness of carroll fuhrer and wilcox s 1994 findings when alternative measures of consumer confidence are used in their prediction equations they report that use of the michigan index of consumer expectations improves on the estimation results of carroll fuhrer and wilcox 1994 bram and ludvigson 1998 and ludvigson 2004 compare the forecasting performance of the michigan ics and the u s conference board s index of consumer confidence icc their findings indicate that the conference board s index provides additional information about future consumer consumption that is not captured by the michigan index however chopin and darrat 2000 utilizing a multivariate causality framework report that the conference board s icc is an unreliable predictor of u s retail sales as regards other studies using non u s data acemoglu and scott 1994 employ granger causality and regression analyses to determine if consumer confidence as measured by the gallup poll in the united kingdom can predict future consumption they find that consumer confidence is a leading indicator of future consumption growth in a subsequent study delorme kamerschen and voeks 2002 examine whether consumer confidence and rational expectations are the same in the united kingdom as they are in the united states they report that the predictive ability of the u k consumer confidence index is greater than that of the united states belessiotis 1996 using french data also reports that the consumer confidence index provides decent explanatory power for future consumer spending in canada kwan and cotsomitis 2005 find that although consumer sentiment is a reliable predictor of consumer expenditures at the national level results obtained using regional data are quite mixed fan and wong 1998 find that unlike the case in the united states or the united kingdom confidence indicators in hong kong have little or no explanatory power in forecasting household spending the existing studies on the ability of consumer confidence to predict household spending have produced mixed results the results vary depending on the sample period chosen the frequency of observations monthly or quarterly and the different survey methodologies employed to gauge consumer attitudes moreover most of these studies confine their attention to single country investigations given the diversity of results it is important to investigate the predictive power of consumer confidence on the basis of comparable time series data for as many countries as possible this paper presents a first formal attempt to study the ability of consumer confidence to forecast household spending within a multicountry framework to this end we use two confidence indices namely the consumer confidence indicator cci and the economic sentiment indicator esi both of which are derived from the european commission business and consumer survey ecbcs

spotting sunspots some evidence in support of models with self fulfilling prophecies abstract this paper adds financial assests to roger farmer s business cycle model with increasing returns and self fulfilling beliefs by using information from the financial markets in conjunction with the structure of the model we can uncover from financial data the belief shocks that drive the model specifically we assume that belief shocks drive both economic fluctuations and asset returns the financial market information allows us to identify these shocks we use our methods to generate dynamic simulations of the model and show that it has incremental predictive power for key us time series

consumer confidence and economic fluctuations if consumers become pessimistic about the state of the economy can there be a slowdown in output even if their pessimism is not based on economic fundamentals recent macroeconomic models show the answer is yes if there are strategic complementarities and multiple equilibria we investigate the link between consumer confidence and economic fluctuations using vector autoregressions in all models after controlling for economic fundamentals the hypothesis that consumer sentiment does not cause gnp in the granger sense can be rejected variance decompositions suggest that consumer sentiment accounts for between 13 and 26 percent of the innovation variance of gnp

consumer confidence and economic activity a factor augmented var approach abstractthis study aims to analyse the effects of the consumer confidence on economic activity for the us market we use the empirical factor augmented vector autoregression favar method which enables us to incorporate a wide range of economic activity factors into the analysis the consumer confidence index cci is chosen as the principal variable that is presumed to represent the degree of optimism on the state of economic activity the results show that consumer confidence and economic activity are strongly correlated for manufacturing related factors such as industrial production and inventories we also observe strong relation among cci and personal consumption expenditures as well as housing market variables

psychology consumer sentiment and household expenditures the aim of this article is to assess the role of the italian consumer sentiment index csi as an autonomous driving force of consumption decisions we test for the presence of rule of thumb consumers as originally proposed by campbell and mankiw 1991 using sentiment measures distinguished by respondent s working condition and consumption data disaggregated according to durability over the period 1982 2004 the consumption sentiment relationship is found to be stronger for some groups of households and for some particular categories of expenditures moreover sentiment seems to be not well explained by economic fundamentals alone capturing also the effects of the political cycle and exceptional circumstances

does financial deregulation cause a consumption boom according to a growing number of critics the process of financial liberalisation in the 1980s is to blame for the volatile macroeconomic development in a number of countries including the u k and the nordic economies we examine how financial deregulation affected one important component of aggregate demand private consumption a main finding is that the swedish consumption boom of the late 1980s can be explained along other lines than financial deregulation the mid 1980s also constituted a period when real wage growth picked up and our data are consistent with the simple idea that permanent income dynamics was an important factor

partisanship and economic behavior do partisan differences in economic forecasts predict real economic behavior survey data regularly show that assessments of current and expected future economic performance are more positive when a respondent s partisanship matches that of the president to determine if this is a survey artifact or something deeper we investigate whether partisanship is associated with behavioral differences in economic decisions we construct a new data set of county level quarterly taxable sales to examine the effect of partisanship on consumption consumption change following a presidential election is correlated with a county s partisan complexion a result consistent with partisans acting outside the domain of politics in accordance with the opinions they express in surveys these results support an expansive view of the role of partisanship in mass politics and help validate surveys as a method for studying political behavior

would information on consumer confidence have helped to predict uk household expenditure during the recent economic crisis abstractthe objective is to investigate whether access to data on consumer confidence would have aided forecasts of the growth of uk household consumption expenditure over the recent period of economic crisis a disaggregated study is performed on the basis that consideration is given not only to household spending in total but also to expenditure on each of durable goods semi durable goods nondurable goods and services the empirical analysis demonstrates how modifications which are made to the harmonized indicator of the european commission are able to enhance predictive accuracy however the benefit which is derived from consulting consumer survey data does not extend to an earlier interval over which the behaviour of consumer sentiment was far less volatile

on the dynamics of u s consumer sentiment and economic policy assessment abstractwe utilize the michigan surveys of consumers data to first investigate the dynamic relationship between consumers assessment of current and future economic conditions index of current economic conditions icc and index of consumer expectations ice and then examine how these assessments are influenced by deterioration improvement in consumers appraisal of economic policies of the government gp we further assess how deterioration improvement in icc and ice influences gp for 1978 2015 our findings first indicate that icc and ice are cointegrated and both respond to disequilibrium to restore the long run equilibrium relationship second deterioration in gp results in deterioration in both icc and ice improvement in gp however results in improvement in ice with no impact on icc third deterioration in both icc and ice results in deterioration in gp improvement in ice results in improvement in gp but improvement in icc has no impact on gp the observed asymmetries are in line with n

more than a feeling confidence uncertainty and macroeconomic fluctuations economists observers and policy makers often emphasize the role of sentiment as a potential driver of the business cycle in this paper we provide three contributions to this debate first we give an overview of the recent literature on the nexus between sentiment considering both confidence and uncertainty and economic activity second we review existing empirical measures of sentiment in particular consumer confidence stock market volatility smv and economic policy uncertainty epu on monthly data for 27 countries 1985 2016 third we identify some new stylized facts based on international evidence while different measures are surprisingly lowly correlated on average in each country they are typically highly positively correlated across countries suggesting the existence of a global factor or sizeable international spillovers of sentiment consumer confidence has the closest co movement with economic and financial variables and most of the correlations are contemporaneous or forward looking consistent with the view that economic sentiment is indeed a driver of activity

the just price as the price obtainable in an open market this article argues that the price obtainable in an open market provides the best standard for determining the justice or injustice of the price of a product the article argues that this standard which is closely related to positions which have been held for hundreds of years is superior to several alternative conceptions of the just price that have been put forward in recent years and is not subject to fundamental criticisms which can be addressed to them the article also shows how this standard is grounded in more fundamental principles of justice such as desert and equality

linear and nonlinear causality between changes in consumption and consumer attitudes abstract adopting both linear and nonlinear granger causality tests we find consumer attitude indices of the university of michigan s surveys are very useful in predicting consumption movements of the united states

unconventional economic policies and sentiment an international assessment this paper estimates using bayesian and global vars the spillover effects of unconventional fiscal and monetary policies implemented in the united states and in the eurozone during the last decade consumer confidence and investor sentiment indicators are introduced in the models in order to highlight the signalling channel in the responses to economic policy innovations in times of crisis our results reveal that consumer and investor perceptions of innovative economic measures are relevant to study the pass through of economic policies to the real sector in times of crisis and zero lower bound interest rates in particular the signalling channel plays an important role in successful unconventional economic policies moreover if unconventional economic policies have an impact abroad the effects are similar to those measured in the domestic country region consequently coordination and transparency are a prerequisite for ensuring short term growth after a global financial crisis

turns in consumer confidence an information advantage linked to manufacturing this research shows that the manufacturing sector contains private information advantages for consumer confidence it examines the consumer confidence manufacturing link by comparing the u s national level index of consumer sentiment with identically constructed confidence indices from a key manufacturing state and a nonmanufacturing state granger causality analysis shows that the manufacturing state s confidence index leads the national index whereas the nonmanufacturing state s confidence index lags it factors influencing confidence include percentage manufacturing employment equity markets indicators and disposable income fitting a consumption function to confidence measures for the three confidence indices shows the strongest relationship to be in the manufacturing state jel d12 copyright 2006 oxford university press

deleveraging crises and deep recessions a behavioural approach macroeconomic dynamics are characterized by alternating patterns of periods of relative stability and large swings standard micro founded macro economic models account for these patterns through exogenous and persistent shocks in this paper we develop a fully decentralized and micro founded macro economic agent based model augmented with an opinion model which produces endogenous waves of pessimism and optimism that feed back into firms leverage and households precautionary saving behaviour a major emergent property of our model is precisely the complex successions of stable and unstable macro economic regimes the model is further able to account for a wide spectrum of macro and micro empirical regularities within this framework we analyse a series of macro economic phenomena of key relevance in the current macro economic debate especially the occurrence of deleveraging crises and fisherian debt deflation recessions our analysis suggests that the relative dynamics of prices and wages and the resulting income distribution along a deflation ary path are critical determinants of the severity of the recession and the chances of recovery

a mean variance approach to forecasting with the consumer confidence index this article refines the way consumer confidence survey data are used in forecasting models the refinement is easy to describe it extends existing models by controlling for statistically significant changes in consumer confidence index values the motivation behind this refinement is simply that not all changes in the confidence index are statistically significant and mean index values alone provide a noisy signal using michigan index of consumer confidence from 1967 through 2013 we show that controlling for significant versus insignificant changes in the consumer confidence index materially enhances the explanatory power of household expenditure forecasting models

information animal spirits and the meaning of innovations in consumer confidence we show that unexplained innovations in several variables representing survey responses to forwardlooking questions on the michigan survey of consumers have powerful prognostic implications for the future paths of macroeconomic variables we attempt to distinguish the hypothesis that these impulse responses indicate a causal channel from autonomous movements in sentiment to economic outcomes the animal spirits view from the alternative interpretation that the surprise confidence movements summarize information about future economic prospects the information view in natural rate models animal spirits shocks are associated with overshooting of among other variables consumption that attenuates when agents come to grips with their overreaction while information shocks about the long future are followed by gradual movements in macroeconomic variables that are not subsequently reversed in a baseline vector autoregression involving consumption income and confidence the data come down sharply in favor of the information view the impulse responses of consumption and gdp show no tendency to attenuate even after a number of years further confidence innovations have strong implications for labor productivity many quarters into the future in somewhat larger vars with an information block that includes inflation and or stock prices the impulse responses to confidence innovations continue to have the permanent shape that defines information shocks but they are smaller in magnitude we demonstrate that this is due to the fact that both inflation and stock price innovations have prognostic implications for future productivity that are very similar to the implications of innovations in confidence addition of unemployment to the system induces a transitory component that changes the shape of the impulse responses and somewhat weakens the previously airtight case against animal spirits but it does not provide constructive evidence of such effects

consumer attitudes and their forecasting power for consumer spending the university of michigan s surveys of consumers is summarized with principal components of consumer attitudes with respect to income and wealth prices and interest rates and credit availability these summary measures contain information beyond that captured by the index of consumer sentiment the summary measures have forecasting power for aggregate consumption behavior even when controlling for economic fundamentals these measures also help to improve significantly upon survey of professional forecasters blue chip consensus and federal reserve board s forecasts of consumption and other real activity measures consistent with their predictive ability conditioned upon a broader set of fundamentals and forecasters judgment

a critique of the legal and philosophical case for rent control rent control is an economic abomination it diverts investments away from residential rent units it leads to their deterioration it is responsible for urban decay such as in the south bronx it does not help poor tenants it is a horrendous means of income redistribution yet this economic regulation is beloved of intellectuals hot beds of pro rent control sentiment are berkeley ann arbor and cambridge particularly in the legal and philosophical communities the present article is dedicated to an exploration and rejection of the arguments in behalf of rent control which emanate from this source

the tourism economy causality in the united states a sub industry level examination abstract this study analyzes the relationships between the performance of four tourism related industries airlines casinos hotels and restaurants and gdp in the u s using cointegration and granger causality tests the results show no cointegration between economic growth and industry performance in the u s this suggests that mechanisms to increase the revenue of tourism related industries can potentially be successful in the long run even in the face of sustained economic stagnation the results also indicate a temporal causal hierarchy among industry performance which could be a good tool for timing and prioritizing the allocation of resources among industries to ensure better overall tourism and economic outcomes investors and managers could also use this temporal hierarchy to identify the best timing for investments and business strategies by observing performance trends of industries higher on the temporal hierarchy

fuel demand on uk roads and dieselisation of fuel economy abstract because of high oil prices and climate change policy governments are now seeking ways to improve new car fuel economy thus contributing to air quality and energy security one strategy is to increase dieselisation rates of the vehicle fleet recent trends in fuel economy show improvement since 1995 however efforts need to go further if the eu voluntary agreement targets on co 2 a greenhouse gas emission standard are to be achieved trends show diesel car sales have accelerated rapidly and that the advantage of new car fuel economy of diesel cars over gasoline ones is narrowing posing a new challenge we estimate the demand for new car fuel economy in the uk in the long run consumers buy fuel economy but not in the short run we found that long term income and price changes were the main drivers to achieve improvements particularly for diesel cars and that there is no break in the trend of fuel economy induced by the agreement adopted in the 1990s policy should target more closely both consumer choice of and use of diesel cars

consumer confidence and rational expectations in the united states compared with the united kingdom this paper examines the relationship between consumer confidence and the rational expectations permanent income hypothesis in the usa and compares the results with those obtained for the uk the study expands previous analysis by defining consumption as motor vehicles goods excluding motor vehicles and services the results suggest that predictive ability of the usa s consumer confidence is less than that of the uk but that contrary to the uk study confidence does not predict future consumption growth of services and is therefore consistent with rational expectations permanent income hypothesis

the macroeconomic effects of false announcements suppose that the government were to announce the economy will be booming in six months and this announcement is based on false data what effect would such an announcement have on future aggregate activity this paper employs revisions of the series of leading economic indicators to test the hypothesis that such an announcement would have a positive effect on future activity we find that the evidence is generally consistent with the hypothesis and that for the time period 1976 1988 the expectational shocks measured by these revisions explain over 20 percent of the fluctuation in the quarterly growth rate of industrial production

sentiments and economic activity evidence from u s states we examine whether sentiment influences aggregate demand by studying the relationship between the michigan survey expectations concerning national output growth and future economic activity at the state level we instrument for local sentiments with political outcomes positing that agents in states with a higher share of congressmen from the political party of the sitting president will be more optimistic this instrument is strong in the first stage and our results confirm a positive relationship between sentiments and future state economic activity that is robust to a battery of sensitivity tests

real business cycles and the animal spirits hypothesis abstract we calibrate a quantitative equilibrium macroeconomic model with an aggregate technology that is subject to increasing returns and show that this model may display fluctuations at business cycle frequencies even when there are no shocks to the fundamentals of the economy these fluctuations are due to the self fulfilling beliefs of investors which we call animal spirits we compare the impulse response functions predicted by our model and by two other more standard models with a four variable vector autoregression on u s data our animal spirits economy is the most successful of the three at matching broad features of the dynamic responses in the data journal of economic literature classification numbers e00 e3 e32

bank size and household financial sentiment surprising evidence from university of michigan surveys of consumers we analyze comparative advantages disadvantages of small and large banks in improving household sentiment regarding financial conditions we match sentiment data from the university of michigan surveys of consumers with local banking market data from 2000 to 2014 surprisingly the evidence suggests that large rather than small banks have significant comparative advantages in boosting household sentiment findings are robust to instrumental variables and other econometric methods additional analyses are consistent with both scale economies and the superior safety of large banks as channels behind the main findings these channels appear to more than offset stronger relationships with and greater trust in small banks

how does public information affect the frequency of trading in airline stocks abstract this paper examines how firm specific and macroeconomic announcements affect transaction rates in u s airline stocks using a version of the autoregressive conditional hazard framework of hamilton and jorda 2002 that incorporates market microstructure variables we show that on average trading intensity spikes prior and consequent to macroeconomic announcements but decreases around firm specific releases further when we use intraday crude oil futures returns as a proxy for industry relevant and globally important news we find that their effects are statistically significant with higher oil futures returns increasing the probability of trade

central bank communication in the media and investor sentiment abstract this paper explores the relationship between central bank communication and investor sentiment we first use media coverage on fed chair s communication to quantify the degree of confidence and optimism expressed by the fed chair and call this variable the overconfidence indicator second we relate the overconfidence indicator to investor sentiment our results show that an overconfident fed chair is significantly associated with higher investor sentiment further extensions suggest that i investors are more sensitive to central bank communication during a recession and that ii they adjust rapidly their sentiment following central bank communication thus showing that there is no underreaction bias these findings provide additional insights on how central bank communication shapes investor sentiment in the context of the global financial crisis and the zero lower bound on nominal interest rates