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Consumer Confidence And Real Economic Growth In The Eurozone

Author

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  • Lachezar Borisov

    (Higher School of Insurance and Finance, Bulgaria)

Abstract

Over the past 15 years, the world economic system has experienced two global crises: the financial and economic crisis of 2008 and the pandemic crisis of 2020. The financial crisis of 2008 had a significant impact on the development of the world economy, including the eurozone. Although some sectors of the economy are not recovering and have not reached pre-crisis levels of efficiency, overall economies are characterized by predictable and positive economic trends. The pandemic crisis poses new challenges to the economy in terms of business closures, disrupted supply chains, and high and accelerating inflation. All this brought to the fore the need to analyze the correlations between various indicators and the dynamics of economic growth, so that when unforeseen crises occur, decisions can be made quickly. The aim of the study is to analyze the degree of correlation between the indicator of consumer confidence and real GDP growth by quarter in the euro area. The tested hypothesis is that for the last three years there has been a strong correlation between quarterly data on real economic growth and consumers' direct assessments, as expressed by the consumer confidence indicator. The regression analysis and hypothesis testing are performed using seasonally adjusted monthly data on consumer confidence indicator and seasonally adjusted annual data by quarters on real annual GDP growth in Q2 2019 – Q1 2022. The in-depth regression analysis shows that there is a statistically significant linear relationship between the indicator of consumer confidence and real annual GDP growth by quarters for the period under study. The results of the Granger causality test confirm the conclusions drawn from the dynamic, correlation, and regression analyses. The results of the test prove not only the presence of causality, but also the ability of the consumer confidence indicator to predict real annual growth by quarter during periods of crisis. All this allows to conclude that in periods of import crises, the indicator of consumer confidence can also be used as an early signal of the presence of systemic problems and to determine the dynamics of GDP, as well as to implement specific economic measures and policies.

Suggested Citation

  • Lachezar Borisov, 2022. "Consumer Confidence And Real Economic Growth In The Eurozone," Baltic Journal of Economic Studies, Publishing house "Baltija Publishing", vol. 8(3).
    • Handle: RePEc:bal:journl:2256-0742:2017:8:3:2
    DOI: 10.30525/2256-0742/2022-8-3-7-13
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    References listed on IDEAS

    as
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    4. 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.
    5. Petar Sorić, 2018. "Consumer confidence as a GDP determinant in New EU Member States: a view from a time-varying perspective," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 45(2), pages 261-282, May.
    6. Atsuo Utaka, 2003. "Confidence and the real economy - the Japanese case," Applied Economics, Taylor & Francis Journals, vol. 35(3), pages 337-342.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    early warning systems; casual relationship; Covid-19; economic and inflationary crisis;
    All these keywords.

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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