Monetary policy and inflation rate in the behavior of consumer sentiment in the us. A fractional integration and cointegration analysis

Manuel Monge, Ana Lazcano and Juan Infante

Research in Economics, 2024, vol. 78, issue 3

Abstract: Consumer sentiment is a relevant tool for experts when it comes to determining the economic situation in a country, making it possible to analyze the spending trend in advance; for this reason, this paper analyzes links between monetary policy and the inflation rate in the behavior of consumer sentiment in the United States. We use methodologies based on fractional integration and fractional cointegration to obtain the stochastic properties of the monthly time series, from December 2019 to August 2022. The results using fractional integration methodologies exhibit a high degree of persistence and the consumer price index (CPI) and consumer sentiment index present a non-mean reversion I(1) behavior. Focusing on the cointegrating part, we conclude from the results that: 1) an increase in the variable “Total Monetary Base” produces an increase in the CPI, 2) the “variation in the total monetary base” in the United States does not affect consumer sentiment, and 3) a positive variation in the consumer sentiment indicator affects the increase in the inflation rate in the United States.

Keywords: Consumer sentiment; CPI; Total monetary base; Fractional integration; Fractional cointegration (search for similar items in EconPapers)
JEL-codes: C22 C32 E20 E40 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:reecon:v:78:y:2024:i:3:s1090944324000450

DOI: 10.1016/j.rie.2024.100981

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