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Does Consumer Confidence Forecast Household Spending? The Euro Area Case

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Author Info
Dion, David Pascal

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Abstract

The following analysis, based on error correction models, suggests that consumer confidence, together with traditional macroeconomic variables, contains a forecasting and explicative power on consumption. By including consumer confidence in a consumption function, consumer confidence releases a significant coefficient. Such a confidence-augmented consumption model provides good forecasting results.

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File URL: http://mpra.ub.uni-muenchen.de/911/
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Publisher Info
Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 911.

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Date of creation: 22 Nov 2006
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Handle: RePEc:pra:mprapa:911

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Related research
Keywords: Consumer confidence consumption function forecasting consumer attitudes and behaviour households

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Find related papers by JEL classification:
D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Other Model Applications
E27 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation
E21 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation and Testing

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.:

  1. 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(2001-1), pages 175-216. [Downloadable!]
  2. Kumar, V. & Leone, Robert P. & Gaskins, John N., 1995. "Aggregate and disaggregate sector forecasting using consumer confidence measures," International Journal of Forecasting, Elsevier, vol. 11(3), pages 361-377, September. [Downloadable!] (restricted)
  3. Campbell, John Y. & Mankiw, N. Gregory, 1991. "The response of consumption to income : A cross-country investigation," European Economic Review, Elsevier, vol. 35(4), pages 723-756, May. [Downloadable!] (restricted)
  4. 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. [Downloadable!] (restricted)
  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, issue Jun, pages 59-78. [Downloadable!]
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  6. Berg Lennart & Bergström Reinhold, 1996. "Consumer Confidence and Consumption in Sweden," Working Paper Series 1996:7, Uppsala University, Department of Economics. [Downloadable!]
  7. 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. [Downloadable!] (restricted)
    Other versions:
  8. Michael C. Lovell, 1975. "Why Was the Consumer Feeling So Sad?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 6(1975-2), pages 473-479. [Downloadable!]
  9. Adrian W. Throop, 1992. "Consumer sentiment: its causes and effects," Economic Review, Federal Reserve Bank of San Francisco, pages 35-59. [Downloadable!]
  10. Dion, David Pascal, 2006. "Does Consumer Confidence Forecast Household Spending?," MPRA Paper 902, University Library of Munich, Germany. [Downloadable!]
  11. 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. [Downloadable!] (restricted)
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Cited by:
(explanations, 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.)

  1. Gomes, Orlando, 2007. "On the stability of endogenous growth models: an evaluation of the agents’ response to output fluctuations," MPRA Paper 2891, University Library of Munich, Germany. [Downloadable!]
  2. Gomes, Orlando, 2007. "Consumer confidence, endogenous growth and endogenous cycles," MPRA Paper 2883, University Library of Munich, Germany. [Downloadable!]
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