U.S. Consumers and the War in Iraq

The Non-Economics of Consumer Confidence

Robert Keyfitz

Robert Keyfitz is a Senior Economist in the Development Prospects Group of the World Bank (www.worldbank.org/prospects). He is involved in various modeling and forecasting activities and covers Sub Saharan Africa for the Bank’s world macroeconomic outlook. He holds a doctorate in economics from the London School of Economics.

Modeling consumer confidence as a state-space system allows economic and non-economic influences to be distinguished and attributes virtually all of the recent volatility in consumer confidence to the latter. Through their depressing effects on consumer confidence, ‘war jitters’ and fears about weapons of mass destruction are estimated to have lowered consumption spending by a cumulative $40 billion, or 0.3 percent, over the past two years.

Read the article: HTML | PDF