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Expenditure and Confidence: Using Daily Data to Identify Shocks to Consumer Confidence

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Abstract

The importance of consumer confidence in stimulating economic activity is a disputed issue in macroeconomics. Do changes in confidence represent autonomous fluctuations in optimism, independent of information on economic fundamentals, or are they a reflection of economic news? This article uses novel daily data to understand what can be learned about the dynamics of consumer confidence and spending. In contrast to the existing literature that uses data collected at lower frequencies, I find that the estimated relationship between daily consumer confidence and daily spending is weak. I interpret this finding as an indication that on a day-to-day basis, consumers are rationally inattentive and do not react to small and temporary fluctuations in consumer confidence.
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  • Marta Lachowska, "undated". "Expenditure and Confidence: Using Daily Data to Identify Shocks to Consumer Confidence," Upjohn Working Papers ml16-oep, W.E. Upjohn Institute for Employment Research.
    • Handle: RePEc:upj:weupjo:ml16-oep
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    File URL: http://oep.oxfordjournals.org/content/early/2016/03/30/oep.gpw009
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    Cited by:

    1. John Bagnall & David Bounie & Kim P. Huynh & Anneke Kosse & Tobias Schmidt & Scott Schuh, 2016. "Consumer Cash Usage: A Cross-Country Comparison with Payment Diary Survey Data," International Journal of Central Banking, International Journal of Central Banking, vol. 12(4), pages 1-61, December.
    2. Aneta Maria Kłopocka, 2017. "Does Consumer Confidence Forecast Household Saving and Borrowing Behavior? Evidence for Poland," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 133(2), pages 693-717, September.
    3. Jean-Paul L’Huillier & Robert Waldmann & Donghoon Yoo, 2021. "Confidence, Fundamentals, and Consumption," ISER Discussion Paper 1135, Institute of Social and Economic Research, Osaka University.
    4. Garz, Marcel, 2018. "Effects of unemployment news on economic perceptions – Evidence from German Federal States," Regional Science and Urban Economics, Elsevier, vol. 68(C), pages 172-190.
    5. Marta Lachowska & Wayne Vroman & Stephen A. Woodbury, 2020. "Experience Rating and the Dynamics of Financing Unemployment Insurance," National Tax Journal, National Tax Association;National Tax Journal, vol. 73(3), pages 673-698, September.

    More about this item

    Keywords

    consumer confidence; economic activity;

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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