How do geopolitical risks and uncertainty shape US consumer confidence?

Moustapha Badran, Mohamed Awada, Joanna Darwiche and Whelsy Boungou

Economics Letters, 2025, vol. 247, issue C

Abstract: This study examines the impact of trade and monetary policy uncertainty during geopolitical shocks on U.S. consumer confidence. Using monthly data from January 1993 to June 2024, we find that both trade and monetary policy uncertainties have significantly shaped U.S. consumer confidence during major geopolitical events. Moreover, trade policy uncertainty significantly worsens consumer confidence during heightened geopolitical tension, while monetary policy uncertainty tends to stabilize sentiment. Our findings suggest that policymakers should implement clear and consistent trade policies during geopolitical unrest and effectively use monetary policy to reassure consumers. Ultimately, this research underscores the importance of addressing trade and monetary uncertainties to bolster economic resilience and enhance consumer confidence in challenging times.

Keywords: Geopolitical risk; Trade policy uncertainty; Monetary policy uncertainty; Consumer confidence; Behavioral economics (search for similar items in EconPapers)
JEL-codes: D12 E52 F13 F51 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:247:y:2025:i:c:s0165176524005998

DOI: 10.1016/j.econlet.2024.112115

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