For over a year, various surveys reported that Canadian businesses and consumers are rather pessimistic about the economic situation. Assessing the extent to which this wave of pessimism can cause an economic downturn is a methodological challenge that Kevin Moran, Associate Professor at Université Laval, Dalibor Stevanovic, Full Professor at ESG UQAM, both CIRANO researchers and Fellow, and Adam Abdel Kader Touré, PhD student at ESG UQAM. are addressing in a recent CIRANO study.

Using Canadian and U.S. historical data and causal analyses based on autoregressive vector models, the authors suggest that correlations between confidence and economic activity do contain a causal component.

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