Consumer Confidence, News and Consumption Stimulation

In the Chinese urban data, there is a stronger relationship between consumer behavior (measured by consumption income ratio or cy ratio) and consumer confidence (measured by Consumer Confidence Index or CCI), which implies expectation about the future plays an important role in domestic demand. In our paper, a structural VAR method (based on Beaudry&Portier 2006 AER) is employed to identify the news shock about three markets including housing, education and medical care. We also extract the components in CCI about news shocks for those three sectors. After that, we conduct regression on cy ratio against those components extracted from CCI, and find that the expectation on housing accounts more importance in consumption, education takes a second place and medical care has little effect.