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Consumer Confidence and Aggregate Consumption Expenditures in the United States

Author

Listed:
  • Bahram Adrangi

    () (The University of Portland, USA)

  • Joseph Macri

    () (Department of Economics, Macquarie University, Australia)

Abstract

This paper examines the relationship between consumer confidence and consumption expenditures in the US for the period 1970:1-2007:4. Consumer confidence surveys are widely reported in the business and economics media and play an important role in the direction of business decisions and equity market movements. Despite the widely cited importance and popularity of consumer confidence indices, empirical studies attempting to establish a causal relationship between consumer confidence indices and consumption expenditures are mixed. This paper employs disaggregated consumer expenditures on services, nondurable and durable goods. The consumption functions for the three categories were obtained from the well-established Fair (2009) Macro-econometric model of the US economy. The results of our regression estimation and cointegration analysis, for both the short and long-run, suggests that consumer confidence is a determining factor for expenditures on consumer durable goods only. This finding supports the work of Blanchard (1993) and Hall (1993).

Suggested Citation

  • Bahram Adrangi & Joseph Macri, 2011. "Consumer Confidence and Aggregate Consumption Expenditures in the United States," Review of Economics & Finance, Better Advances Press, Canada, vol. 1, pages 1-18, February.
  • Handle: RePEc:bap:journl:110101
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    References listed on IDEAS

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    More about this item

    Keywords

    Consumer sentiment; Cointegration; Macroeconomic models; Household consumption;

    JEL classification:

    • C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables
    • E0 - Macroeconomics and Monetary Economics - - General
    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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