Sentiment, Productivity, and Economic Growth / George M. Constantinides, Maurizio Montone, Valerio Potì, Stella Spilioti.

Format:

Book

Author/Creator:

Constantinides, George M.

Contributor:

National Bureau of Economic Research.

Montone, Maurizio.

Potì, Valerio.

Spilioti, Stella.

Series:

Working Paper Series (National Bureau of Economic Research) no. w31031.

NBER working paper series no. w31031

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2023.

Summary:

Previous research finds correlation between sentiment and future economic growth, but disagrees on the channel that explains this result. In this paper, we shed new light on this issue by exploiting cross-country variation in sentiment and market efficiency. We find that sentiment shocks in G7 countries increase economic activity, but only temporarily and without affecting productivity. By contrast, sentiment shocks in non-G7 countries predict prolonged economic growth and a corresponding increase in productivity. The results suggest that sentiment can indeed create economic booms, but only in less advanced economies where noisy asset prices make sentiment and fundamentals harder to disentangle.

Notes:

Print version record

March 2023.