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How Should We Measure Consumer Confidence (Sentiment)? Evidence from the Michigan Survey of Consumers

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  • Jeff Dominitz
  • Charles F. Manski

Abstract

The Michigan Index of Consumer Sentiment (ICS) and other indices of consumer confidence are prominent in public discourse on the economy but have little presence in modern economic research. The sparsity of modern research follows an earlier period when economists scrutinized in some depth the methods and data used to produce consumer confidence indices. The literature to date has focused on the predictive power of the survey data used to form the indices; there has been very little study of their micro foundations. This paper analyzes the responses to eight expectations questions that have appeared on the Michigan Survey of Consumers in the period June 2002 through May 2003. Four questions elicit micro and macroeconomic expectations in the traditional qualitative manner; two are components of the ICS. Four questions use a percent chance' format to elicit subjective probabilities of micro and macroeconomic events; versions of these questions have previously appeared in the Survey of Economic Expectations.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 9926.

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Date of creation: Aug 2003
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Publication status: published as Jeff Dominitz & Charles F. Manski, 2004. "How Should We Measure Consumer Confidence?," Journal of Economic Perspectives, American Economic Association, vol. 18(2), pages 51-66, Spring.
Handle: RePEc:nbr:nberwo:9926

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  1. J. Dominitz & C. F. Manski, . "Perceptions of Economic Insecurity: Evidence from the Survey of Economic Expectations," Institute for Research on Poverty Discussion Papers 1105-96, University of Wisconsin Institute for Research on Poverty.
  2. 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.
  3. Caskey, John P, 1985. "Modeling the Formation of Price Expectations: A Bayesian Approach," American Economic Review, American Economic Association, American Economic Association, vol. 75(4), pages 768-76, September.
  4. Das, J.W.M. & Dominitz, J. & Soest, A.H.O. van, 1997. "Comparing Predictions and Outcomes: Theory and Application to Income Changes," Discussion Paper, Tilburg University, Center for Economic Research 1997-45, Tilburg University, Center for Economic Research.
  5. Dominitz, Jeff, 2001. "Estimation of income expectations models using expectations and realization data," Journal of Econometrics, Elsevier, Elsevier, vol. 102(2), pages 165-195, June.
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Cited by:
  1. Guzman, Giselle C., 2008. "Using sentiment to predict GDP growth and stock returns," MPRA Paper 36505, University Library of Munich, Germany.
  2. Todd R. Stinebrickner & Ralph Stinebrickner, 2009. "Learning about Academic Ability and the College Drop-out Decision," NBER Working Papers 14810, National Bureau of Economic Research, Inc.
  3. Maurizio Bovi, 2005. "Consumers Sentiment and Cognitive Macroeconometrics Paradoxes and Explanations," Macroeconomics, EconWPA 0512002, EconWPA.
  4. Dudek, SÅ‚awomir, 2008. "Consumer Survey Data and short-term forecasting of households consumption expenditures in Poland," MPRA Paper 19818, University Library of Munich, Germany.
  5. Jeff Dominitz & Charles F. Manski, 2011. "Measuring and interpreting expectations of equity returns," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 26(3), pages 352-370, 04.
  6. 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.
  7. Todd R. Stinebrickner & Ralph Stinebrickner, 2011. "Math or Science? Using Longitudinal Expectations Data to Examine the Process of Choosing a College Major," NBER Working Papers 16869, National Bureau of Economic Research, Inc.
  8. Guzman, Giselle C., 2008. "Using sentiment surveys to predict GDP growth and stock returns," MPRA Paper 36653, University Library of Munich, Germany.

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