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Does sentiment explain consumption?

Listed author(s):
  • W. Anthony Bryant
  • Joseph Macri

    ()

Registered author(s):

    This paper examines whether “consumer sentiment,” an often neglected variable, explains consumption expenditures for Australia. Since household consumption accounts for more than 60 percent of U.S. GDP and a similar proportion in other developed economies, fluctuations in consumption may result in significant changes in the state of the economy. Therefore, we develop a theoretical model that suggests why consumer sentiment may influence consumption expenditures. Furthermore, using a carefully specified consumption function as the “test-bed,” we consider empirically whether there is an independent impact of sentiment on consumption. Our results suggest that consumer sentiment does influence variations in consumption expenditure. Copyright Springer 2005

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    File URL: http://hdl.handle.net/10.1007/BF02761545
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    Article provided by Springer & Academy of Economics and Finance in its journal Journal of Economics and Finance.

    Volume (Year): 29 (2005)
    Issue (Month): 1 (March)
    Pages: 97-110

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    Handle: RePEc:spr:jecfin:v:29:y:2005:i:1:p:97-110
    DOI: 10.1007/BF02761545
    Contact details of provider: Web page: http://www.springer.com

    Web page: http://economics-finance.org/

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    1. 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.
    2. Carroll, Christopher D & Fuhrer, Jeffrey C & Wilcox, David W, 1994. "Does Consumer Sentiment Forecast Household Spending? If So, Why?," American Economic Review, American Economic Association, vol. 84(5), pages 1397-1408, December.
    3. Jason Bram & Sydney Ludvigson, 1998. "Does consumer confidence forecast household expenditure? a sentiment index horse race," Economic Policy Review, Federal Reserve Bank of New York, issue Jun, pages 59-78.
    4. Rutledge, D J S & Madden, G M, 1974. "The Australian Short-run Consumption Function: A Comment," The Economic Record, The Economic Society of Australia, vol. 50(130), pages 287-295, June.
    5. Joanne Loundes & Rosanna Scutella, 2000. "Consumer Sentiment and Australian Consumer Spending," Melbourne Institute Working Paper Series wp2000n21, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
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