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Consumer Confidence and the Unemployment Rate in New York State: A Panel Study

Arindam Mandal and Joseph McCollum

New York Economic Review, 2013, vol. 44, issue 1, 3-19

Abstract: This paper explores the short-term and long-run relationship between the unemployment rate and the consumer confidence index in five metropolitan statistical areas (MSAs) of New York State. The paper utilizes a unique dataset collected by the Siena Research Institute (SRI) between 2001 and 2010. We use panel cointegration and panel error-correction models (ECM) to explore the causal relationship between these two variables. The short-run coefficients indicate a negative causality from consumer sentiment to unemployment and vice versa, indicating that unemployment and consumer sentiment reinforce each other in the short run. In the long-run, we find significant negative causality from consumer confidence to unemployment. However, the direction of causality from unemployment to consumer confidence is not significant.

Date: 2013
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