Measures of Investor and Consumer Confidence and Policy Actions in the Current Crisis

The current financial crisis has highlighted the danger that declines in confidence can have a self-fulfilling effect on economic activity. In this paper, the authors consider ways of measuring investor and consumer confidence, and try to explain the evolution of confidence using measures of financial volatility, investment performance, macroeconomic outcomes, and policy actions. They identify a link between investor and consumer confidence. Finally, they show that liquidity provision and easing of interest rates had only a limited effect on financial market spreads during the crisis, arguing for additional measures to address the loss of confidence. The paper focuses on the need for financial regulatory reform, and shows how the incentives to cooperate in this area are stimulated by a common shock to confidence.

Bibliographic Details

Main Authors:	Dailami, Mansoor, Masson, Paul
Language:	English
Published:	2009-07-01
Subjects:	ACCESS TO CAPITAL, ACCESS TO CAPITAL MARKETS, ADVANCED COUNTRIES, AGGREGATE DEMAND, APR, ASSET CLASSES, AUCTION, BALANCE OF PAYMENTS, BALANCE SHEETS, BANK LIQUIDITY, BANK SUPERVISION, BANKING INDUSTRY, BANKING SYSTEMS, BASIS POINTS, BEST PRACTICES, BOND, BOND PRICES, BORROWING COSTS, BUSINESS COMMUNITY, BUSINESS CONFIDENCE, CALCULATIONS, CAPITAL FLOWS, CAPITAL MARKET, CAPITAL MARKETS, CENTRAL BANK, CENTRAL BANKS, COMMERCIAL BANK, COMMERCIAL BANKS, COMMODITIES, COMMODITY, COMMODITY PRICES, CONFIDENCE INDEX, CONFIDENCE INDICES, CONSUMER, CONSUMER CONFIDENCE, CREDIBILITY, CREDIT FACILITY, CREDIT MARKETS, CREDIT SPREADS, CURRENCY, DEBT, DEBT ISSUANCE, DEPOSIT, DEPOSIT INSURANCE, DEPOSITS, DEPRESSION, DEREGULATION, DETERIORATION IN CREDIT, DEVELOPING COUNTRIES, DIVIDEND, DIVIDEND POLICY, DOMESTIC BANKS, DURABLE, ECONOMIC ACTIVITY, ECONOMIC FUTURE, ECONOMIC SECURITY, EFFECT OF LIQUIDITY, EMERGING MARKETS, EMERGING STOCK MARKETS, EQUITIES, EQUITY FLOWS, EQUITY INSTRUMENTS, EQUITY MARKET, EQUITY MARKETS, EQUITY PRICES, EXCHANGE RATE, EXCHANGE RATES, EXPORT GROWTH, FEDERAL RESERVE, FEDERAL RESERVE BANK, FINANCIAL ASSETS, FINANCIAL CRISES, FINANCIAL CRISIS, FINANCIAL DATA, FINANCIAL DISCLOSURE, FINANCIAL INTEGRATION, FINANCIAL MARKET, FINANCIAL MARKETS, FINANCIAL POLICIES, FINANCIAL POLICY, FINANCIAL REFORM, FINANCIAL REGULATION, FINANCIAL SECTORS, FINANCIAL SERVICES, FINANCIAL STABILITY, FINANCIAL SYSTEM, FINANCIAL VOLATILITY, FISCAL POLICY, FISCAL SUSTAINABILITY, FOREIGN BANKS, FOREIGN EXCHANGE, FOREIGN EXCHANGE MARKETS, FOREIGN EXCHANGE RESERVE, FOREIGN EXCHANGE RESERVES, GLOBAL ECONOMY, GLOBAL EQUITY, GLOBAL EQUITY MARKETS, GLOBAL FINANCIAL SYSTEM, GLOBAL MARKETS, GLOBALIZATION, GOVERNMENT ACTIONS, GOVERNMENT BORROWING, GOVERNMENT DEBT, GOVERNMENT FINANCING, GOVERNMENT POLICY, GOVERNMENT SECURITIES, GROWTH RATES, HARMONIZATION, HOLDINGS, INDUSTRIAL COUNTRIES, INFORMATION ASYMMETRIES, INSTITUTIONAL ENVIRONMENTS, INSTITUTIONAL INVESTOR, INSTITUTIONAL INVESTORS, INSTRUMENT, INTEREST RATE, INTEREST RATES, INTERNATIONAL BANK, INTERNATIONAL CAPITAL, INTERNATIONAL CAPITAL FLOWS, INTERNATIONAL FINANCE, INTERNATIONAL INVESTORS, INTERNATIONAL POLITICS, INTERNATIONAL PORTFOLIO, INTERNATIONAL SETTLEMENTS, INVESTING, INVESTMENT BANKS, INVESTMENT PERFORMANCE, INVESTOR BEHAVIOR, INVESTOR CONFIDENCE, LENDER, LENDER OF LAST RESORT, LIQUIDITY, LIQUIDITY FACILITIES, LOAN, LOAN PORTFOLIO, LOCAL CAPITAL MARKET, LOCAL CAPITAL MARKETS, LOSS OF CONFIDENCE, MACROECONOMIC CONDITIONS, MACROECONOMIC DATA, MACROECONOMIC INDICATORS, MACROECONOMIC POLICY, MARKET CAP, MARKET INFORMATION, MARKET MAKERS, MARKET PARTICIPANTS, MARKET PERFORMANCE, MARKET PRICES, MARKET RATE OF RETURN, MARKET VALUATION, MARKET VOLATILITY, MONETARY AUTHORITIES, MONETARY POLICIES, MONETARY POLICY, MONEY SUPPLY, MORTGAGE, MORTGAGE-BACKED SECURITIES, MORTGAGES, OPEN MARKETS, OPEN-MARKET OPERATIONS, OTHER ASSETS, PERSONAL INCOME, POLICY RESPONSE, POLICY RESPONSES, POLITICAL INSTABILITY, PORTFOLIO FLOWS, POSTWAR PERIOD, PRESS COVERAGE, PRICE DISCOVERY, PRICE INDEX, PRIMARY DEALER, PRIMARY DEALERS, PRIVATE BORROWERS, PRIVATE CREDIT, PRIVATE EQUITY, PRIVATE EQUITY INVESTORS, PURCHASES, RAPID GROWTH, RECESSION, REGULATOR, REGULATORS, REGULATORY AUTHORITIES, REGULATORY AUTHORITY, REGULATORY ENVIRONMENT, REGULATORY REFORM, REGULATORY SYSTEM, RESEARCH ASSISTANCE, RISK AVERSION, RISKY ASSETS, SALES, SCANDAL, SCANDALS, SECURITIES, SECURITIES AS COLLATERAL, SECURITY MARKET, SECURITY MARKETS, SOVEREIGN BOND, SOVEREIGN BOND MARKETS, SOVEREIGN GUARANTEES, STANDARD DEVIATIONS, STOCK MARKET, STOCK MARKETS, SWAP, TAX, TOTAL MARKET, TRADE DATA, TRADES, TRANSPARENCY, TREASURIES, TREASURY, TREASURY SECURITIES, UNCERTAINTY, VALUATION, VOLATILITIES, WEALTH CREATION, WORLD ECONOMY, WORLD MARKET, YIELD CURVE,
Online Access:	http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20090720145703 https://hdl.handle.net/10986/4198
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