Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/175724 
Year of Publication: 
2017
Series/Report no.: 
ECB Working Paper No. 2100
Publisher: 
European Central Bank (ECB), Frankfurt a. M.
Abstract: 
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 critically survey the existing literature on 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. 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.
Subjects: 
animal spirits
confidence
uncertainty
business cycles
dynamic correlations
JEL: 
E32
E71
F44
G15
G41
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-2822-9
Document Type: 
Working Paper

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