Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/103203
Authors: 
Debes, Sebastian
Gareis, Johannes
Mayer, Eric
Rüth, Sebastian
Year of Publication: 
2014
Series/Report no.: 
Würzburg Economic Papers 91
Abstract: 
We investigate the role of consumer confidence in the transmission of monetary policy shocks from an empirical and theoretical perspective. Standard VAR based analysis suggests that an empirical measure of consumer confidence drops significantly after a monetary tightening and amplifies the impact of monetary policy on aggregate consumption. Using a behavioral DSGE model, we show that a consumer sentiment channel can account for the empirical findings. In an environment of heterogeneous expectations, which gives rise to the notion of consumer sentiment, innovations to the Federal Funds rate impact on consumer confidence and thereby the broader economy.
Subjects: 
monetary policy
monetary transmission
consumer sentiment
JEL: 
E32
E52
D83
Document Type: 
Working Paper

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