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Consumer confidence and economic activity: a factor augmented VAR approach

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Abstract

This study aims to analyse the effects of the consumer confidence on economic activity for the US market. We use the empirical factor-augmented vector autoregression (FAVAR) method, which enables us to incorporate a wide range of economic activity factors into the analysis. The consumer confidence index (CCI) is chosen as the principal variable that is presumed to represent the degree of optimism on the state of economic activity. The results show that consumer confidence and economic activity are strongly correlated for manufacturing-related factors, such as industrial production and inventories. We also observe strong relation among CCI and personal consumption expenditures, as well as housing market variables.

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  • E. Kilic & S. Cankaya, 2016. "Consumer confidence and economic activity: a factor augmented VAR approach," Applied Economics, Taylor & Francis Journals, vol. 48(32), pages 3062-3080, July.
    • Handle: RePEc:taf:applec:v:48:y:2016:i:32:p:3062-3080
    DOI: 10.1080/00036846.2015.1133902
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    Cited by:

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    2. Camilo Alberto Cárdenas-Hurtado & María Alejandra Hernández-Montes, 2019. "Understanding the Consumer Confidence Index in Colombia: A structural FAVAR analysis," Borradores de Economia 1063, Banco de la Republica de Colombia.
    3. Huijian Han & Zhiming Li & Zongwei Li, 2023. "Using Machine Learning Methods to Predict Consumer Confidence from Search Engine Data," Sustainability, MDPI, vol. 15(4), pages 1-12, February.
    4. Aneta M. Klopocka & Rumiana Gorska, 2021. "Forecasting Household Saving Rate with Consumer Confidence Indicator and its Components: Panel Data Analysis of 14 European Countries," European Research Studies Journal, European Research Studies Journal, vol. 0(3), pages 874-898.
    5. Ouyang, Zi-sheng & Liu, Meng-tian & Huang, Su-su & Yao, Ting, 2022. "Does the source of oil price shocks matter for the systemic risk?," Energy Economics, Elsevier, vol. 109(C).
    6. 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).

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