IDEAS home Printed from https://ideas.repec.org/a/kap/empiri/v45y2018i2d10.1007_s10663-016-9360-4.html
   My bibliography  Save this article

Consumer confidence as a GDP determinant in New EU Member States: a view from a time-varying perspective

Author

Listed:
  • Petar Sorić

    (University of Zagreb)

Abstract

This paper offers a pioneer attempt to unveil the time-varying impact of consumer confidence on GDP growth. The empirical analysis is based on a state space model with time-varying coefficients, which is employed on a dataset from 11 New EU Member States. It is shown that the impact of consumer confidence (reflecting the overall uncertainty level in the country) skyrockets in the 2008 Great Recession, providing evidence that the recent crisis was to some extent psychologically governed. After that, the influence of consumer confidence on GDP mostly stabilizes at earlier levels. The EU accession seems not to play an important role in the observed relationship. The obtained conclusions are quite robust across countries and remain intact upon the inclusion of additional control variables in the model. A possible solution for keeping the psychological determinants of the crisis under control is a prompt, coherent, and clearly communicated crisis management policy, which might help preventing a momentous drop of consumer confidence and overall uncertainty.

Suggested Citation

  • 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.
    • Handle: RePEc:kap:empiri:v:45:y:2018:i:2:d:10.1007_s10663-016-9360-4
    DOI: 10.1007/s10663-016-9360-4
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s10663-016-9360-4
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s10663-016-9360-4?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Chow, Gregory C & Lin, An-loh, 1971. "Best Linear Unbiased Interpolation, Distribution, and Extrapolation of Time Series by Related Series," The Review of Economics and Statistics, MIT Press, vol. 53(4), pages 372-375, November.
    2. Matthew Rabin & Richard H. Thaler, 2013. "Anomalies: Risk aversion," World Scientific Book Chapters, in: Leonard C MacLean & William T Ziemba (ed.), HANDBOOK OF THE FUNDAMENTALS OF FINANCIAL DECISION MAKING Part I, chapter 27, pages 467-480, World Scientific Publishing Co. Pte. Ltd..
    3. Eberly, Janice C, 1994. "Adjustment of Consumers' Durables Stocks: Evidence from Automobile Purchases," Journal of Political Economy, University of Chicago Press, vol. 102(3), pages 403-436, June.
    4. Batchelor, Roy & Dua, Pami, 1998. "Improving macro-economic forecasts: The role of consumer confidence," International Journal of Forecasting, Elsevier, vol. 14(1), pages 71-81, March.
    5. Roberto Golinelli & Giuseppe Parigi, 2004. "Consumer Sentiment and Economic Activity: A Cross Country Comparison," Journal of Business Cycle Measurement and Analysis, OECD Publishing, Centre for International Research on Economic Tendency Surveys, vol. 2004(2), pages 147-170.
    6. B. Peters & Jon Pierre & Tiina Randma-Liiv, 2011. "Global Financial Crisis, Public Administration and Governance: Do New Problems Require New Solutions?," Public Organization Review, Springer, vol. 11(1), pages 13-27, March.
    7. Christopher D. Carroll, 1992. "The Buffer-Stock Theory of Saving: Some Macroeconomic Evidence," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 23(2), pages 61-156.
    8. Giuseppe Bertola & Luigi Guiso & Luigi Pistaferri, 2005. "Uncertainty and Consumer Durables Adjustment," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 72(4), pages 973-1007.
    9. Scott R. Baker & Nicholas Bloom & Steven J. Davis, 2016. "Measuring Economic Policy Uncertainty," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 131(4), pages 1593-1636.
    10. Stilianos Fountas & Menelaos Karanasos & Jinki Kim, 2006. "Inflation Uncertainty, Output Growth Uncertainty and Macroeconomic Performance," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 68(3), pages 319-343, June.
    11. Gerhard Bry & Charlotte Boschan, 1971. "Cyclical Analysis of Time Series: Selected Procedures and Computer Programs," NBER Books, National Bureau of Economic Research, Inc, number bry_71-1, March.
    12. Jesus Fernandez-Villaverde & Pablo Guerron-Quintana & Juan F. Rubio-Ramirez & Martin Uribe, 2011. "Risk Matters: The Real Effects of Volatility Shocks," American Economic Review, American Economic Association, vol. 101(6), pages 2530-2561, October.
    13. John A. Cotsomitis & Andy C. C. Kwan, 2006. "Can Consumer Confidence Forecast Household Spending? Evidence from the European COmmission Business and Consumer Surveys," Southern Economic Journal, John Wiley & Sons, vol. 72(3), pages 597-610, January.
    14. Toda, Hiro Y. & Yamamoto, Taku, 1995. "Statistical inference in vector autoregressions with possibly integrated processes," Journal of Econometrics, Elsevier, vol. 66(1-2), pages 225-250.
    15. Gerhard Bry & Charlotte Boschan, 1971. "Foreword to "Cyclical Analysis of Time Series: Selected Procedures and Computer Programs"," NBER Chapters, in: Cyclical Analysis of Time Series: Selected Procedures and Computer Programs, pages -1, National Bureau of Economic Research, Inc.
    16. Petar Sorić & Blanka Škrabić & Mirjana Čižmešija, 2013. "European Integration in the Light of Business and Consumer Surveys," Eastern European Economics, Taylor & Francis Journals, vol. 51(2), pages 5-20, March.
    17. Commandeur, Jacques J.F. & Koopman, Siem Jan, 2007. "An Introduction to State Space Time Series Analysis," OUP Catalogue, Oxford University Press, number 9780199228874.
    18. Gulasekaran Rajaguru & Tilak Abeysinghe, 2004. "Quarterly real GDP estimates for China and ASEAN4 with a forecast evaluation," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 23(6), pages 431-447.
    19. Durbin, James & Koopman, Siem Jan, 2012. "Time Series Analysis by State Space Methods," OUP Catalogue, Oxford University Press, edition 2, number 9780199641178, Decembrie.
    20. B. Guy Peters, 2011. "Governance responses to the fiscal crisis—comparative perspectives," Public Money & Management, Taylor & Francis Journals, vol. 31(1), pages 75-80, January.
    21. Jansen, W. Jos & Nahuis, Niek J., 2003. "The stock market and consumer confidence: European evidence," Economics Letters, Elsevier, vol. 79(1), pages 89-98, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Melanie Koch & Thomas Scheiber, 2022. "Mitigating the impact of the pandemic on personal finances in CESEE: descriptive evidence for 2020," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue Q2/22, pages 63-96.
    2. Petar Sorić, 2022. "Ability to consume versus willingness to consume: the role of nonlinearities," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 49(3), pages 663-689, August.
    3. Andrzej Cieslik & Mahdi Ghodsi, 2021. "Economic sentiment indicators and foreign direct investment: Empirical evidence from European Union countries," International Economics, CEPII research center, issue 168, pages 56-75.
    4. Lachezar Borisov, 2022. "Consumer Confidence And Real Economic Growth In The Eurozone," Baltic Journal of Economic Studies, Publishing house "Baltija Publishing", vol. 8(3).
    5. Melanie Koch & Thomas Scheiber, 2022. "Household savings in CESEE: expectations, experiences and common predictors," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue Q1/22, pages 29-54.
    6. Petar Sorić & Mirjana Čižmešija & Marina Matošec, 2020. "EU Consumer Confidence and the New Modesty Hypothesis," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 152(3), pages 899-921, December.
    7. Čižmešija Mirjana & Lukač Zrinka & Novoselec Tomislav, 2019. "Nonlinear optimisation approach to proposing novel Croatian Industrial Confidence Indicator," Croatian Review of Economic, Business and Social Statistics, Sciendo, vol. 5(2), pages 17-26, December.
    8. Marina Matosec & Zdenka Obuljen Zoricic, 2019. "Identifying the Interdependence between Consumer Confidence and Macroeconomic Developments in Croatia," Interdisciplinary Description of Complex Systems - scientific journal, Croatian Interdisciplinary Society Provider Homepage: http://indecs.eu, vol. 17(2-B), pages 345-354.
    9. Ivana Lolić & Marija Logarušić & Mirjana Čižmešija, 2022. "Recent Revision of the European Consumer Confidence Indicator: Is There any additional Space for Improvement?," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 159(3), pages 845-863, February.
    10. Oscar Claveria, 2021. "Forecasting with Business and Consumer Survey Data," Forecasting, MDPI, vol. 3(1), pages 1-22, February.
    11. Petar Sorić & Blanka Škrabić Perić & Marina Matošec, 2022. "Breaking new grounds: a fresh insight into the leading properties of business and consumer survey indicators," Quality & Quantity: International Journal of Methodology, Springer, vol. 56(6), pages 4511-4535, December.
    12. Petar Sorić & Ivana Lolić & Marija Logarušić, 2022. "Economic Sentiment and Aggregate Activity: A Tale of Two European Cycles," Journal of Common Market Studies, Wiley Blackwell, vol. 60(2), pages 445-462, March.
    13. Zorio-Grima, Ana & Merello, Paloma, 2020. "Consumer confidence: Causality links with subjective and objective information sources," Technological Forecasting and Social Change, Elsevier, vol. 150(C).
    14. Petar Soric & Mateo Zokalj & Marija Logarusic, 2020. "Economic determinants of Croatian consumer confidence: real estate prices vs. macroeconomy," Interdisciplinary Description of Complex Systems - scientific journal, Croatian Interdisciplinary Society Provider Homepage: http://indecs.eu, vol. 18(2B), pages 240-257.
    15. Petar Sorić, 2020. "“Normal†growth of the Chinese economy: new metrics based on consumer confidence data," Economics Bulletin, AccessEcon, vol. 40(2), pages 1740-1746.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Blanka Škrabić Perić & Petar Sorić, 2018. "A Note on the “Economic Policy Uncertainty Index”," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 137(2), pages 505-526, June.
    2. Čižmešija Mirjana & Sorić Petar & Lolić Ivana, 2017. "The interrelationship between media reports and the recession in Croatia," Croatian Review of Economic, Business and Social Statistics, Sciendo, vol. 3(1), pages 16-34, June.
    3. Nataša Erjavec & Petar Soriæ & Mirjana Èižmešija, 2016. "Predicting the probability of recession in Croatia: Is economic sentiment the missing link?," Zbornik radova Ekonomskog fakulteta u Rijeci/Proceedings of Rijeka Faculty of Economics, University of Rijeka, Faculty of Economics and Business, vol. 34(2), pages 555-579.
    4. N. Bloom, 2016. "Fluctuations in uncertainty," Voprosy Ekonomiki, NP Voprosy Ekonomiki, issue 4.
    5. Yasutomo Murasawa & Roberto S. Mariano, 2004. "Constructing a Coincident Index of Business Cycles Without Assuming a One-Factor Model," Econometric Society 2004 Far Eastern Meetings 710, Econometric Society.
    6. Wolfgang Nierhaus & Timo Wollmershäuser, 2016. "ifo Konjunkturumfragen und Konjunkturanalyse: Band II," ifo Forschungsberichte, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 72.
    7. Amélie Charles & Chew Lian Chua & Olivier Darné & Sandy Suardi, 2021. "Oil price shocks, real economic activity and uncertainty," Bulletin of Economic Research, Wiley Blackwell, vol. 73(3), pages 364-392, July.
    8. Petar Soric & Mateo Zokalj & Marija Logarusic, 2020. "Economic determinants of Croatian consumer confidence: real estate prices vs. macroeconomy," Interdisciplinary Description of Complex Systems - scientific journal, Croatian Interdisciplinary Society Provider Homepage: http://indecs.eu, vol. 18(2B), pages 240-257.
    9. Petar Sorić, 2022. "Ability to consume versus willingness to consume: the role of nonlinearities," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 49(3), pages 663-689, August.
    10. Roberto S. Mariano & Yasutomo Murasawa, 2010. "A Coincident Index, Common Factors, and Monthly Real GDP," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 72(1), pages 27-46, February.
    11. Ricci L. Reber & Sarah J. Pack, 2014. "Methods of Temporal Disaggregation for Estimating Output of the Insurance Industry," BEA Working Papers 0115, Bureau of Economic Analysis.
    12. Hall, Viv B & Thomson, Peter, 2022. "A boosted HP filter for business cycle analysis: evidence from New Zealand’s small open economy," Working Paper Series 9473, Victoria University of Wellington, School of Economics and Finance.
    13. Josué Diwambuena & Jean-Paul K. Tsasa, 2021. "The Real Effects of Uncertainty Shocks: New Evidence from Linear and Nonlinear SVAR Models," BEMPS - Bozen Economics & Management Paper Series BEMPS87, Faculty of Economics and Management at the Free University of Bozen.
    14. Layal Mansour-Ichrakieh, 2021. "The Impact of Israeli and Saudi Arabian Geopolitical Risks on the Lebanese Financial Market," JRFM, MDPI, vol. 14(3), pages 1-24, February.
    15. Orazio P. Attanasio & Guglielmo Weber, 2010. "Consumption and Saving: Models of Intertemporal Allocation and Their Implications for Public Policy," Journal of Economic Literature, American Economic Association, vol. 48(3), pages 693-751, September.
    16. Luca Gambetti & Dimitris Korobilis & John D. Tsoukalas & Francesco Zanetti, 2023. "Agreed and Disagreed Uncertainty," Working Paper series 23-01, Rimini Centre for Economic Analysis.
    17. Strohsal, Till & Proaño, Christian R. & Wolters, Jürgen, 2019. "Characterizing the financial cycle: Evidence from a frequency domain analysis," Journal of Banking & Finance, Elsevier, vol. 106(C), pages 568-591.
    18. Viv B. Hall & Peter Thomson, 2021. "Does Hamilton’s OLS Regression Provide a “better alternative” to the Hodrick-Prescott Filter? A New Zealand Business Cycle Perspective," Journal of Business Cycle Research, Springer;Centre for International Research on Economic Tendency Surveys (CIRET), vol. 17(2), pages 151-183, November.
    19. Andrea Carriero & Todd E. Clark & Massimiliano Marcellino, 2018. "Measuring Uncertainty and Its Impact on the Economy," The Review of Economics and Statistics, MIT Press, vol. 100(5), pages 799-815, December.
    20. Michael ARTIS & Massimiliano MARCELLINO & Tommaso PROIETTI, 2002. "Dating the Euro Area Business Cycle," Economics Working Papers ECO2002/24, European University Institute.

    More about this item

    Keywords

    Consumer confidence; Business and consumer surveys; State space models; Time-varying coefficients;
    All these keywords.

    JEL classification:

    • 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
    • E03 - Macroeconomics and Monetary Economics - - General - - - Behavioral Macroeconomics
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • G01 - Financial Economics - - General - - - Financial Crises

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:empiri:v:45:y:2018:i:2:d:10.1007_s10663-016-9360-4. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.