Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/277138 
Authors: 
Year of Publication: 
2008
Citation: 
[Journal:] Intervention. European Journal of Economics and Economic Policies [ISSN:] 2195-3376 [Volume:] 05 [Issue:] 2 [Year:] 2008 [Pages:] 301-328
Publisher: 
Metropolis-Verlag, Marburg
Abstract: 
The paper considers the dynamic adjustments of an average opinion index that can be derived from a microfounded framework where the individual agents switch between two kinds of sentiment with certain transition probabilities. The index can thus represent a general business climate, i.e., expectations about the future course of the economy. This approach is empirically tested with the survey expectations published by the ZEW and ifo institute. The estimated coefficients make economic sense and are highly significant. In particular, besides effects from fundamental data like the output gap in the recent past, one can identify a strong herding mechanism within both panels, such that the agents do not just join the majority but, metaphorically speaking, follow each single motion of the crowd. In addition, the transition probabilities of the ZEW agents are found to be influenced by the ifo climate but not the other way around.
Subjects: 
herding dynamics
animal spirits
individual transition probabilities
ifo and ZEW climate index
Kalman filter
JEL: 
D84
E32
E37
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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