The Usefulness of Consumer Confidence Indexes in the United States
AbstractNo abstract is available for this item.
Download InfoIf 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.
Bibliographic InfoPaper provided by Bank of Canada in its series Working Papers with number 02-22.
Length: 34 pages Abstract: This paper assesses the usefulness of consumer confidence indexes in forecasting aggregate consumer spending in the United States. The literature generally dismisses the relevance of these indexes. Without formal modelling, however, some researchers (Garner 1991 and Throop 1992) suggest that the indexes could be helpful during periods of major economic or political shocks. Such periods are usually associated with high volatility of consumer confidence, suggesting that large swings in confidence could be useful indicators of consumption. Our work distinguishes itself from previous research in that we provide a rigorous assessment of this possibility by estimating a consumption function in which only large variations of confidence can affect spending. Our results show that economists and forecasters should pay attention to consumer confidence, especially in times of elevated economic or political uncertainty.
Date of creation: 2002
Date of revision:
Contact details of provider:
Postal: 234 Wellington Street, Ottawa, Ontario, K1A 0G9, Canada
Phone: 613 782-8845
Fax: 613 782-8874
Web page: http://www.bank-banque-canada.ca/
Domestic demand and components; Economic models; International topics;
Find related papers by JEL classification:
- D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
- E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
- E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications
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.:
- 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, vol. 84(5), pages 1397-1408, December.
- Christopher D. Carroll & Jeffery C. Fuhrer & David W. Wilcox, 1994. "RATS code for Does Consumer Sentiment Forecast Household Spending? If So, Why?," QM&RBC Codes 49, Quantitative Macroeconomics & Real Business Cycles.
- C. Alan Garner, 1991. "Forecasting consumer spending: should economists pay attention to consumer confidence surveys?," Economic Review, Federal Reserve Bank of Kansas City, issue May, pages 57-71.
- Jeffrey C. Fuhrer, 1993. "What role does consumer sentiment play in the U.S. macroeconomy?," New England Economic Review, Federal Reserve Bank of Boston, issue Jan, pages 32-44.
- Charles Steindel, 2001. "The effect of tax changes on consumer spending," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 7(Dec).
- Sydney Ludvigson, 1996. "Consumer sentiment and household expenditure: reevaluating the forecasting equations," Research Paper 9636, Federal Reserve Bank of New York.
- John G. Matsusaka & Argia M. Sbordone, 1993.
"Consumer confidence and economic fluctuations,"
Working Paper Series, Macroeconomic Issues
93-13, Federal Reserve Bank of Chicago.
- Acemoglu, Daron & Scott, Andrew, 1994.
"Consumer Confidence and Rational Expectations: Are Agents' Beliefs Consistent with the Theory?,"
Royal Economic Society, vol. 104(422), pages 1-19, January.
- Daron Acemoglu & Andrew Scott, 1993. "Consumer Confidence and Rational Expectations: Are Agents Beliefs Consistent with the Theory?," CEP Discussion Papers dp0119, Centre for Economic Performance, LSE.
- Milton Friedman, 1957. "A Theory of the Consumption Function," NBER Books, National Bureau of Economic Research, Inc, number frie57-1.
- Amano, Robert A. & van Norden, Simon, 1995. "Terms of trade and real exchange rates: the Canadian evidence," Journal of International Money and Finance, Elsevier, vol. 14(1), pages 83-104, February.
- David F. Hendry & Neil R. Ericsson, 1989. "An econometric analysis of UK money demand in MONETARY TRENDS IN THE UNITED STATES AND THE UNITED KINGDOM by Milton Friedman and Anna J. Schwartz," International Finance Discussion Papers 355, Board of Governors of the Federal Reserve System (U.S.).
- Flavin, Marjorie A, 1981. "The Adjustment of Consumption to Changing Expectations about Future Income," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 974-1009, October.
- Campbell, John Y. & Mankiw, N. Gregory, 1990.
"Permanent Income, Current Income, and Consumption,"
3353762, Harvard University Department of Economics.
- Maria W. Otoo, 1999. "Consumer sentiment and the stock market," Finance and Economics Discussion Series 1999-60, Board of Governors of the Federal Reserve System (U.S.).
- Saul H. Hymans, 1970. "Consumer Durable Spending: Explanation and Prediction," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 1(2), pages 173-206.
- Nicholas S. Souleles, 2001. "Consumer Sentiment: Its Rationality and Usefulness in Forecasting Expenditure - Evidence from the Michigan Micro Data," NBER Working Papers 8410, National Bureau of Economic Research, Inc.
- E. Philip Howrey, 2001. "The Predictive Power of the Index of Consumer Sentiment," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 32(1), pages 175-216.
- Adrian W. Throop, 1992. "Consumer sentiment: its causes and effects," Economic Review, Federal Reserve Bank of San Francisco, pages 35-59.
- Hall, Robert E, 1978. "Stochastic Implications of the Life Cycle-Permanent Income Hypothesis: Theory and Evidence," Journal of Political Economy, University of Chicago Press, vol. 86(6), pages 971-87, December.
- Annabelle Mourougane & Moreno Roma, 2003.
"Can confidence indicators be useful to predict short term real GDP growth?,"
Applied Economics Letters,
Taylor & Francis Journals, vol. 10(8), pages 519-522.
- Mourougane, Annabelle & Roma, Moreno, 2002. "Can confidence indicators be useful to predict short term real GDP growth?," Working Paper Series 0133, European Central Bank.
- Michael C. & Pao-Lin Tien, 2000. "Economic Discomfort and Consumer Sentiment," Eastern Economic Journal, Eastern Economic Association, vol. 26(1), pages 1-8, Winter.
- Teresa Santero & Niels Westerlund, 1996. "Confidence Indicators and Their Relationship to Changes in Economic Activity," OECD Economics Department Working Papers 170, OECD Publishing.
- 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, issue Jun, pages 59-78.
- Jason Bram & Sydney Ludvigson, 1997. "Does consumer confidence forecast household expenditure?: A sentiment index horse race," Research Paper 9708, Federal Reserve Bank of New York.
- Peter C.B. Phillips & Mico Loretan, 1989.
"Estimating Long Run Economic Equilibria,"
Cowles Foundation Discussion Papers
928, Cowles Foundation for Research in Economics, Yale University.
- Eric M. Leeper, 1992. "Consumer attitudes: king for a day," Economic Review, Federal Reserve Bank of Atlanta, issue Jul, pages 1-15.
- Côté, Denise & Johnson, Marianne, 1998. "Consumer Attitudes, Uncertainty, and Consumer Spending," Working Papers 98-16, Bank of Canada.
- Easaw, Joshy Z. & Ghoshray, Atanu, 2007. "Confidence or competence: Do presidencies matter for households' subjective preferences?," European Journal of Political Economy, Elsevier, vol. 23(4), pages 1025-1037, December.
- Dudek, Sławomir, 2008. "Consumer Survey Data and short-term forecasting of households consumption expenditures in Poland," MPRA Paper 19818, University Library of Munich, Germany.
- 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, vol. 22, pages 1-15, Diciembre.
- Claudia Godbout & Jocelyn Jacob, 2010. "Le pouvoir de prévision des indices PMI," Discussion Papers 10-3, Bank of Canada.
- 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.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.