ECIN Replication Package for "Consumer Confidence and Household Investment"

Replication files for Consumer Confidence and Household Investment. Can consumer confidence account for the leading indicator property of household investment over the US business cycle? We find that it does. Consumer confidence leads household investment and housing starts by two and one quarter, respectively. Household investment increases in a persistent manner after a positive confidence shock, and so do total hours worked, output, and real house prices. Quantitatively, confidence shocks account for a substantial share of the forecast error variation in these variables. They are also unrelated to future supply-side fundamentals. Demand-side forces originating in consumers' social and psychological factors are, therefore, relevant for household investment dynamics.<br>