How do geopolitical risks and uncertainty shape US consumer confidence?

Moustapha Badran, Mohamed Awada, Joanna Darwiche and Whelsy Boungou
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Moustapha Badran: MRE - Montpellier Recherche en Economie - UM - Université de Montpellier
Mohamed Awada: MRE - Montpellier Recherche en Economie - UM - Université de Montpellier
Joanna Darwiche: Saint-Joseph University of Beirut
Whelsy Boungou: PSB - Paris School of Business - HESAM - HESAM Université - Communauté d'universités et d'établissements Hautes écoles Sorbonne Arts et métiers université

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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)
Date: 2025-02
Note: View the original document on HAL open archive server: https://hal.science/hal-05083249v1
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Published in Economics Letters, 2025, 247, pp.112115. ⟨10.1016/j.econlet.2024.112115⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05083249

DOI: 10.1016/j.econlet.2024.112115

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