NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Information, Animal Spirits, and the Meaning of Innovations in Consumer Confidence

Robert B. Barsky, Eric R. Sims

NBER Working Paper No. 15049
Issued in June 2009
NBER Program(s):   EFG   ME

Innovations to measures of consumer confidence convey incremental information about economic activity far into the future. Comparing the shapes of impulse responses to confidence innovations in the data with the predictions of a calibrated New Keynesian model, we find little evidence of a strong causal channel from autonomous movements in sentiment to economic outcomes (the "animal spirits" interpretation). Rather, these impulse responses support an alternative hypothesis that the surprise movements in confidence reflect information about future economic prospects (the "information" view). Confidence innovations are best characterized as noisy measures of changes in expected productivity growth over a relatively long horizon.

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This paper was revised on December 5, 2011

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Document Object Identifier (DOI): 10.3386/w15049

Published: Robert B. Barsky & Eric R. Sims, 2012. "Information, Animal Spirits, and the Meaning of Innovations in Consumer Confidence," American Economic Review, American Economic Association, vol. 102(4), pages 1343-77, June.

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