The role of consumer sentiment in the transmission of monetary policy to consumer expenditure

Viet Hoang Dinh

Economica, 2025, vol. 92, issue 367, 823-847

Abstract: This paper shows that changes in consumer sentiment play a quantitatively important role in the transmission of monetary policy on economic activity. Specifically, the paper's empirical estimates indicate that changes in short‐term consumer sentiment may very well double the negative responses of consumer expenditure to contractionary monetary policy shocks. In contrast, long‐term consumer sentiment plays only a minimal role in the propagation of monetary policy shocks into consumer expenditure.

Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:bla:econom:v:92:y:2025:i:367:p:823-847

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