Working Paper: CEPR ID: DP15466
Authors: Andrew Eggers; Martin Ellison; Sang Seok Lee
Abstract: The convention in the news media is to announce a recession if a country experiences two consecutive quarters of negative growth. We exploit the arbitrary threshold implied by this practice to identify the economic impact of recession announcements through a Regression Discontinuity Design (RDD). Estimation results show that news of a recession leads to a discontinuous fall in consumer confidence, consumption growth and final estimates of GDP growth in a panel of countries. The effect is large, robust and statistically significant.
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Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Announcement of a recession (E60) | Drop in consumer confidence (D19) |
| Announcement of a recession (E60) | Decline in consumption growth (F62) |
| Drop in consumer confidence (D19) | Changes in economic behavior (E70) |
| Announcement of a recession (E60) | Consumer expectations adjustment (D12) |
| Announcement of a recession (E60) | Influence of news media on economic outcomes (E60) |