Advanced Search
MyIDEAS: Login to save this article or follow this journal

Consumer Confidence and Aggregate Consumption Expenditures in the United States

Contents:

Author Info

  • Bahram Adrangi

    ()
    (The University of Portland, USA)

  • Joseph Macri

    ()
    (Department of Economics, Macquarie University, Australia)

Registered author(s):

    Abstract

    This paper examines the relationship between consumer confidence and consumption expenditures in the US for the period 1970:1-2007:4. Consumer confidence surveys are widely reported in the business and economics media and play an important role in the direction of business decisions and equity market movements. Despite the widely cited importance and popularity of consumer confidence indices, empirical studies attempting to establish a causal relationship between consumer confidence indices and consumption expenditures are mixed. This paper employs disaggregated consumer expenditures on services, nondurable and durable goods. The consumption functions for the three categories were obtained from the well-established Fair (2009) Macro-econometric model of the US economy. The results of our regression estimation and cointegration analysis, for both the short and long-run, suggests that consumer confidence is a determining factor for expenditures on consumer durable goods only. This finding supports the work of Blanchard (1993) and Hall (1993).

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://www.bapress.ca/Journal/Consumer%20Confidence%20and%20Aggregate%20Consumption%20Expenditures%20in%20the%20United%20States.pdf
    Download Restriction: no

    Bibliographic Info

    Article provided by Better Advances Press, Canada in its journal Review of Economics & Finance.

    Volume (Year): 1 (2011)
    Issue (Month): (February)
    Pages: 1-18

    as in new window
    Handle: RePEc:bap:journl:110101

    Contact details of provider:
    Postal: 17 Alton Towers Circle, Unit 101 Toronto, ON, M1V3L8, Canada
    Phone: +1-647-728-3961
    Web page: http://www.bapress.ca

    Order Information:
    Postal: 17 Alton Towers Circle, Unit 101 Toronto, ON, M1V3L8, Canada
    Email:

    Related research

    Keywords: Consumer sentiment; Cointegration; Macroeconomic models; Household consumption;

    Find related papers by JEL classification:

    References

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
    as in new window
    1. W. Anthony Bryant & Joseph Macri, 2005. "Does sentiment explain consumption?," Journal of Economics and Finance, Springer, Springer, vol. 29(1), pages 97-110, March.
    2. repec:fth:inseep:9645 is not listed on IDEAS
    3. Dimitrios D. Thomakos & Gikas A. Hardouvelis, 2007. "Consumer Confidence and Elections," Working Paper Series, The Rimini Centre for Economic Analysis 42-07, The Rimini Centre for Economic Analysis, revised Jul 2007.
    4. Andy C.C. Kwan & John A. Cotsomitis, 2006. "The Usefulness of Consumer Confidence in Forecasting Household Spending in Canada: A National and Regional Analysis," Economic Inquiry, Western Economic Association International, Western Economic Association International, vol. 44(1), pages 185-197, January.
    5. Jason Bram & Sydney Ludvigson, 1998. "Does consumer confidence forecast household expenditure? a sentiment index horse race," Economic Policy Review, Federal Reserve Bank of New York, Federal Reserve Bank of New York, issue Jun, pages 59-78.
    6. W. Jos Jansen & Niek J. Nahuis, 2002. "The Stock Market and Consumer Confidence: European Evidence," MEB Series (discontinued), Netherlands Central Bank, Monetary and Economic Policy Department 2002-11, Netherlands Central Bank, Monetary and Economic Policy Department.
    7. Kwiatkowski, Denis & Phillips, Peter C. B. & Schmidt, Peter & Shin, Yongcheol, 1992. "Testing the null hypothesis of stationarity against the alternative of a unit root : How sure are we that economic time series have a unit root?," Journal of Econometrics, Elsevier, Elsevier, vol. 54(1-3), pages 159-178.
    8. Brigitte Desroches & Marc-André Gosselin, 2002. "The Usefulness of Consumer Confidence Indexes in the United States," Working Papers, Bank of Canada 02-22, Bank of Canada.
    9. Pesaran, M.H. & Shin, Y., 1993. "Cointegration and Speed of Convergence to Equilibrium," Cambridge Working Papers in Economics, Faculty of Economics, University of Cambridge 9311, Faculty of Economics, University of Cambridge.
    10. Chew Lian Chua & Sarantis Tsiaplias, 2008. "Can Consumer Sentiment and Its Components Forecast Australian GDP and Consumption?," Melbourne Institute Working Paper Series, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne wp2008n03, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
    11. Lee, Kevin C. & Pesaran, M. Hashem, 1993. "Persistence profiles and business cycle fluctuations in a disaggregated model of U.K. output growth," Ricerche Economiche, Elsevier, Elsevier, vol. 47(3), pages 293-322, September.
    12. Johansen, Søren & Juselius, Katarina, 1992. "Testing structural hypotheses in a multivariate cointegration analysis of the PPP and the UIP for UK," Journal of Econometrics, Elsevier, Elsevier, vol. 53(1-3), pages 211-244.
    13. Pesaran, M. H. & Shin, Y. & Smith, R. J., 1996. "Testing for the 'Existence of a Long-run Relationship'," Cambridge Working Papers in Economics, Faculty of Economics, University of Cambridge 9622, Faculty of Economics, University of Cambridge.
    14. K. H. McIntyre, 2007. "Reconciling Consumer Confidence and Permanent Income Consumption," Eastern Economic Journal, Eastern Economic Association, Eastern Economic Association, vol. 33(2), pages 257-275, Spring.
    15. Roberto Golinelli & Giuseppe Parigi, 2004. "Consumer Sentiment and Economic Activity: A Cross Country Comparison," Journal of Business Cycle Measurement and Analysis, OECD Publishing,CIRET, OECD Publishing,CIRET, vol. 2004(2), pages 147-170.
    16. Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, Econometric Society, vol. 59(6), pages 1551-80, November.
    17. Easaw, Joshy Z. & Heravi, Saeed M., 2004. "Evaluating consumer sentiments as predictors of UK household consumption behavior: Are they accurate and useful?," International Journal of Forecasting, Elsevier, Elsevier, vol. 20(4), pages 671-681.
    18. Easaw, Joshy Z. & Garratt, Dean & Heravi, Saeed M., 2005. "Does consumer sentiment accurately forecast UK household consumption? Are there any comparisons to be made with the US?," Journal of Macroeconomics, Elsevier, Elsevier, vol. 27(3), pages 517-532, September.
    19. Fan, Chengze Simon & Wong, Phoebe, 1998. "Does consumer sentiment forecast household spending?: The Hong Kong case," Economics Letters, Elsevier, Elsevier, vol. 58(1), pages 77-84, January.
    20. WDA Bryant & JE Macri, 2001. "Does Sentiment Explain Consumption?," Research Papers, Macquarie University, Department of Economics 0107, Macquarie University, Department of Economics.
    21. Loría, Eduardo & Brito, L., 2004. "Is the Consumer Confidence Index a Sound Predictor of the Private Demand in the United States?," Estudios de Economía Aplicada, Estudios de Economía Aplicada, Estudios de Economía Aplicada, vol. 22, pages 1-15, Diciembre.
    22. Johansen, Soren, 1995. "Likelihood-Based Inference in Cointegrated Vector Autoregressive Models," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780198774501, October.
    23. Carroll, Christopher D & Fuhrer, Jeffrey C & Wilcox, David W, 1994. "Does Consumer Sentiment Forecast Household Spending? If So, Why?," American Economic Review, American Economic Association, American Economic Association, vol. 84(5), pages 1397-1408, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:bap:journl:110101. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Bill Yan).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.