On the econometric modelling of consumer sentiment shocks in SVARs

Lance A. Fisher, Hyeon-Seung Huh

Research output: Contribution to journalArticle

1 Citation (Scopus)

Abstract

This paper applies recently developed methods for modelling systems of I(0) and I(1) variables to SVARs of consumer sentiment. We first model the shock associated with the structural equation for the I(0) consumer sentiment variable as having a permanent effect on the I(1) variables. Here it appears to convey news about future productivity. The contribution of the accumulated consumer sentiment shock to the permanent component of consumption and GDP increases substantially from 2000 to 2007, a finding we relate to recent work on boom–bust productivity episodes. We then model the sentiment shock as having a transitory effect on the I(1) variables. Here it appears to convey little news and is best thought of as an ‘animal spirits’ shock unrelated to productivity. The impact responses suggest that ‘animal spirits’ are not important in either model.

Original languageEnglish
Pages (from-to)1033-1051
Number of pages19
JournalEmpirical Economics
Volume51
Issue number3
DOIs
Publication statusPublished - 2016 Nov 1

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Econometrics
econometrics
Shock
productivity
Productivity
news
animal
Modeling
Animals
Structural Equations
System Modeling
Model
Econometric modelling
Consumer sentiment
Animal spirits
News

All Science Journal Classification (ASJC) codes

  • Statistics and Probability
  • Mathematics (miscellaneous)
  • Social Sciences (miscellaneous)
  • Economics and Econometrics

Cite this

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On the econometric modelling of consumer sentiment shocks in SVARs. / Fisher, Lance A.; Huh, Hyeon-Seung.

In: Empirical Economics, Vol. 51, No. 3, 01.11.2016, p. 1033-1051.

Research output: Contribution to journalArticle

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