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Can consumer sentiment and its components forecast Australian GDP and consumption?

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  • Chew Lian Chua

    (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne, Australia)

  • Sarantis Tsiaplias

    (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne, Australia)

Abstract

This paper examines whether the disaggregation of consumer sentiment data into its sub-components improves the real-time capacity to forecast GDP and consumption. A Bayesian error correction approach augmented with the consumer sentiment index and permutations of the consumer sentiment sub-indices is used to evaluate forecasting power. The forecasts are benchmarked against both composite forecasts and forecasts from standard error correction models. Using Australian data, we find that consumer sentiment data increase the accuracy of GDP and consumption forecasts, with certain components of consumer sentiment consistently providing better forecasts than aggregate consumer sentiment data. Copyright © 2009 John Wiley & Sons, Ltd.

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File URL: http://hdl.handle.net/10.1002/for.1120
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Bibliographic Info

Article provided by John Wiley & Sons, Ltd. in its journal Journal of Forecasting.

Volume (Year): 28 (2009)
Issue (Month): 8 ()
Pages: 698-711

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Handle: RePEc:jof:jforec:v:28:y:2009:i:8:p:698-711

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Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/2966

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Cited by:
  1. Bahram Adrangi & Joseph Macri, 2011. "Consumer Confidence and Aggregate Consumption Expenditures in the United States," Review of Economics & Finance, Better Advances Press, Canada, vol. 1, pages 1-18, February.
  2. Nguyen, Viet Hoang & Claus, Edda, 2013. "Good news, bad news, consumer sentiment and consumption behavior," Journal of Economic Psychology, Elsevier, vol. 39(C), pages 426-438.
  3. Atsuo Utaka, 2014. "Consumer Confidence and the Japanese Economy -Comparison of Pre- and Post-Bubble Period-," Economics Bulletin, AccessEcon, vol. 34(2), pages 1165-1173.

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