| Sumario: | A study was conducted to examine the link between consumer confidence and economic fluctuations using a series of vector autoregressions that included GNP, consumer sentiment, and various other series that capture fundamentals or are good predictors of GNP. Results indicate that, even after controlling for economic fundamentals, the hypothesis that consumer confidence does not cause GNP (in the Granger sense) can be rejected. Although sentiment is not the most important factor in GNP fluctuations, it accounts for between 13 percent and 26 percent of GNP innovation variance.
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