Twenty-five years of promoting free markets: a history of Economic Affairs

On the 25th anniversary of Economic Affairs this article examines the history of the journal from its founding in 1980 to the present. It presents an account of the key themes that have featured in the journal during that time and argues that its most important contribution has been to explain how markets operate and why well-meaning government intervention seldom improves upon the imperfect outcomes produced by markets.

Consumer confidence indices and stock markets’ meltdowns

Consumer confidence indices (CCIs) are a closely monitored barometer of countries’ economic health and an informative forecasting tool. Using European and US data, we provide a case study of the two recent stock market meltdowns (the post-dotcom bubble correction of 2000–2002 and the 2007–2009 decline at the beginning of the financial crisis) to contribute to the discussion on their appropriateness as proxies for stock markets’ investor sentiment. Investor sentiment should positively covary with stock market movements (DeLong, Shleifer, Summers, and Waldmann 1990); however, we find that the CCI–stock market relationship is not universally positive.We also do not find support for the information effect documented in the previous literature, but identify a more subtle relationship between consumer expectations about future household finances and stock market fluctuations.