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Confidence and Unemployment in the European Union: A lesson from the 2004 enlargement

  • António Caleiro

    (Departamento de Economia, Universidade de Évora)

We use data for the monthly unemployment rate and consumer confidence indicator in the European Union to study whether there is a relationship between unemployment and confidence. Our estimation method is based on a fuzzy logic methodology with a Gaussian membership function. We find a stronger relationship between unemployment and confidence than it is apparent. We show in an ex-post prediction study that this relationship did not change, in a significant way, after the 2004 enlargement of the European Union. This fact constitutes a lesson for the post-2007 enlargement period. The link between unemployment and confidence has important policy implications given its relevance, in particular for the (latest call for a new start of the) Lisbon Strategy.

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Article provided by Faculdade de Economia, Universidade de Coimbra in its journal Notas Económicas.

Volume (Year): (2007)
Issue (Month): 26 (December)
Pages: 15-26

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Handle: RePEc:gmf:journl:y:2007:i:26:p:15-26
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  1. John G. Matsusaka & Argia M. Sbordone, 1993. "Consumer confidence and economic fluctuations," Working Paper Series, Macroeconomic Issues 93-13, Federal Reserve Bank of Chicago.
  2. Sydney C. Ludvigson, 2004. "Consumer Confidence and Consumer Spending," Journal of Economic Perspectives, American Economic Association, vol. 18(2), pages 29-50, Spring.
  3. James E. West & Bruce Linster, 2003. "The Evolution of Fuzzy Rules as Strategies in Two-Player Games," Southern Economic Journal, Southern Economic Association, vol. 69(3), pages 705-717, January.
  4. Mourougane, Annabelle & Roma, Moreno, 2002. "Can confidence indicators be useful to predict short term real GDP growth?," Working Paper Series 0133, European Central Bank.
  5. Antonio Caleiro, 2006. "How is confidence related to unemployment in Portugal?," Applied Economics Letters, Taylor & Francis Journals, vol. 13(13), pages 887-890.
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