News or animal spirits? Consumer confidence and economic activity: Redux

Barsky and Sims (2012, AER) demonstrated, via indirect inference, that confidence innovations can be viewed as noisy signals about medium-term economic growth. They highlighted that the connection between confidence and subsequent activity, such as consumption and output, is primarily driven by news shocks about the future. We expand upon their research by incorporating the Great Recession and ZLB episodes, during which animal spirits have a greater potential to influence economic activity. Nevertheless, we confirm the main finding of Barsky and Sims (2012) that this relationship is predominantly driven by news about the future rather than animal spirits.