Does consumer confidence forecast household expenditure?: A sentiment index horse race
AbstractThis paper investigates the forecasting power of consumer sentiment for household expenditure. We compare the predictive power of two measures of consumer attitudes, and then further compare each survey's expectations component with one another, and with the broader sentiment measures. The results indicate that lagged values of the Conference Board's overall confidence and expectations measures have stronger incremental power for more categories of the growth in consumption expenditure than do measures available from the University of Michigan, though the latter is correlated with future expenditures on automobiles even after economic fundamentals are controlled for. The paper also discusses structural differences between the two surveys and suggests how these differences might be related to the discrepancy in forecasting power.
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Bibliographic InfoPaper provided by Federal Reserve Bank of New York in its series Research Paper with number 9708.
Date of creation: 1997
Date of revision:
Other versions of this item:
- 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.
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- Sydney Ludvigson, 1996. "Consumer sentiment and household expenditure: reevaluating the forecasting equations," Research Paper 9636, Federal Reserve Bank of New York.
- Matsusaka, John G & Sbordone, Argia M, 1995.
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- 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.
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