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Can Consumer Confidence Forecast Household Spending? Evidence from the European COmmission Business and Consumer Surveys

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  • John A. Cotsomitis

    () (Canadian Center for Research in Economics)

  • Andy C. C. Kwan

    () (The Chinese University of Honk Kong)

Abstract

This paper represents a first formal attempt to examine the ability of consumer confidence to forecast household spending within a multicountry framework. To this end, we use two confidence indices, namely the Consumer Confidence Indicator and the Economic Sentiment Indicator, both of which are derived from the European Commission Business and Consumer Survey. As in previous single-country investigations, we find that there is much variability in the in-sample incremental forecasting performance of the confidence indices for the countries canvassed. Further, the results of our out-of-sample tests indicate that the confidence indices considered provide limited information about the future path of household spending.

Suggested Citation

  • 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, Southern Economic Association, vol. 72(3), pages 597-610, January.
  • Handle: RePEc:sej:ancoec:v:72:3:y:2006:p:597-610
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    Cited by:

    1. repec:spr:soinre:v:133:y:2017:i:2:d:10.1007_s11205-016-1376-4 is not listed on IDEAS
    2. Pär Österholm, 2010. "Improving Unemployment Rate Forecasts Using Survey Data," Finnish Economic Papers, Finnish Economic Association, pages 16-26.
    3. Bengt Assarsson & Pär Österholm, 2015. "Do Swedish Consumer Confidence Indicators Do What They Are Intended to Do?," Applied Economics Quarterly (formerly: Konjunkturpolitik), Duncker & Humblot GmbH, Berlin, vol. 61(4), pages 391-404.
    4. Yoko Mimura, 2014. "The Relationship Between Life Satisfaction Among Wives and Financial Preparedness of Households in Japan," Journal of Family and Economic Issues, Springer, vol. 35(4), pages 532-541, December.
    5. Christos Papamichael & Nicoletta Pashourtidou, 2016. "The Role of Survey Data in the Construction of Short-term GDP Growth Forecasts," Cyprus Economic Policy Review, University of Cyprus, Economics Research Centre, vol. 10(2), pages 77-109, December.
    6. Hüseyin Kaya & Sadullah Çelik, 2009. "Empirical Evidence For Day Of The Week Effect In An Emerging Market: The Turkish Case," 2009 Meeting Papers 219, Society for Economic Dynamics.
    7. Thomas Lux & Jaba Ghonghadze, 2011. "Modeling the Dynamics of EU Economic Sentiment Indicators: An Interaction-Based Approach," Post-Print hal-00711445, HAL.
    8. Javier Jareño, 2007. "Opinion-based surveys in the conjunctural analysis of the Spanish economy," Occasional Papers 0706, Banco de España;Occasional Papers Homepage.
    9. Luca Zanin, 2010. "The relationship between changes in the Economic Sentiment Indicator and real GDP growth: a time-varying coefficient approach," Economics Bulletin, AccessEcon, vol. 30(1), pages 837-846.

    More about this item

    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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