“Good News, Bad News, and Consumer Confidence,” by Greg Casey ’09 and Henry Platt Bristol Professor of Economics of Ann Owen, was published in the March issue of Social Science Quarterly.
The paper examines how consumer confidence responds to changes in economic circumstances. According to Owen, “It finds that consumers respond asymmetrically to economic news, but it does not find evidence for a systematic negativity bias once you allow for consumers to respond differently to different news.
“For example, consumers have a strong negative reaction to increases in the unemployment rate, but not a corresponding positive reaction to decreases in the unemployment rate. However, they also react positively to decreases in gas prices, but there is no evidence that they react negatively to increases in gas prices.
The paper suggests that part of the explanation for these asymmetric reactions is that consumers respond to changes in economic fundamentals relative to their expectations.”
The paper grew out of Casey’s senior honors thesis in economics, which Owen supervised. Casey is currently pursuing a Ph.D. in economics at Brown University.