Journal Article

Do Changes in the Stock Market Affect Consumer and Business Confidence?

Abstract: I find that measures of consumer and business confidence respond to stock market surprises. My evidence points to a confidence channel from financial conditions to the real economy. By signaling strong future incomes and profits, high equity valuations boost consumer and business confidence, which in turn stimulates real spending today. These relationships highlight a risk that the recent stock market decline could sap confidence, with adverse effects on real activity.

Keywords: Consumer Confidence; Business Confidence; Stock Market;

JEL Classification: G10;

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Bibliographic Information

Provider: Federal Reserve Bank of Kansas City

Part of Series: Macro Bulletin

Publication Date: 2019-01-09

Issue: January 9, 2019

Pages: 1-3