Angeletos, G. M., Collard, F. & Dellas, H. (2015) “Confidence, aggregate demand, and the business cycle: A new framework, VoxEU Organisation, 16 Μαρτίου.
The Global Crisis has forced a revaluation of the standard macroeconomic models in use worldwide. This column discusses an enrichment that include a formal concept of ‘confidence’ about the short-medium term economic outlook – one that relates to market psychology rather than expectations about technology and policy. This extension helps the model predictions better match reality. It also offers a formalisation of the popular view that depressed spending, arising from a drop in confidence, is a major cause of recessions and that recoveries often hinge on ‘restoring confidence in the economy’.
Macroeconomic activity and economic confidence seem closely linked. Figure 1 shows the relationship between the cyclical component of GDP and a popular measure of economic confidence, the University of Michigan Consumer Sentiment Index. There has not been a single instance of a recession during this period that has not been preceded-accompanied by a significant deterioration in confidence.
Σχετικές αναρτήσεις:
- Merler, S. (2015) “Who’s (still) exposed to Greece? – a first trace of normalisation and resume in confidence since 2013, which the present political turmoil risks to revert“, Bruegel Institute, 29 Ιανουαρίου.
- Smith, Y. (2014) “Understanding the Confidence Fairy“, MacroBusiness, 1 Απριλίου.
- Mody A., (2014), “Europhoria once again- should we view the recent fall in spreads and yields as a sign of confidence or as another overreaction?” Bruegel Blog, 10 Φεβρουαρίου.