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The Link between Government Spending, Consumer Confidence and Consumption Expenditures in Emerging Market Countries

  • Yasemin Özerkek

    ()

    (Department of Economics, Faculty of Economics and Administrative Sciences, Marmara University, Turkey)

  • Sadullah Çelik

    ()

    (Department of Economics, Faculty of Economics and Administrative Sciences, Marmara University, Turkey)

The impact of government spending on private consumption is extensively studied in the literature. However, the main theme of these studies is the possible crowding-in or crowding-out impact of government spending on consumer spending. This paper attempts to introduce a new variable to this well-known literature by investigating the existence of a relationship between government expenditure, consumer spending and consumer confidence for a group of emerging market countries. We examine whether a change in consumer confidence causes any change in government spending. Moreover, we analyze whether there is a feedback from government spending and private consumption to consumer confidence. Our empirical findings demonstrate the important role of consumer confidence on government spending and private consumption expenditures.

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Article provided by Savez ekonomista Vojvodine, Novi Sad, Serbia in its journal Panoeconomicus.

Volume (Year): 57 (2010)
Issue (Month): 4 (December)
Pages: 471-485

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Handle: RePEc:voj:journl:v:57:y:2010:i:4:p:471-485
Contact details of provider: Web page: http://www.panoeconomicus.rs/

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  11. Matsusaka, John G & Sbordone, Argia M, 1995. "Consumer Confidence and Economic Fluctuations," Economic Inquiry, Western Economic Association International, vol. 33(2), pages 296-318, April.
  12. Andy C.C. Kwan & John A. Cotsomitis, 2003. "Can Consumer Attitudes Forecast Household Spending in the United States? Further Evidence from the Michigan Survey of Consumers," Departmental Working Papers _156, Chinese University of Hong Kong, Department of Economics.
  13. Berg Lennart & Bergström Reinhold, 1996. "Consumer Confidence and Consumption in Sweden," Working Paper Series 1996:7, Uppsala University, Department of Economics.
  14. Kaddour Hadri, 1999. "Testing For Stationarity In Heterogeneous Panel Data," Research Papers 1999_04, University of Liverpool Management School.
  15. Davide Furceri & Ricardo M. Sousa, 2009. "The Impact of Government Spending on the Private Sector: Crowding-out versus Crowding-in Effects"," NIPE Working Papers 6/2009, NIPE - Universidade do Minho.
  16. Devereux, Michael B & Head, Allen C & Lapham, Beverly J, 1996. "Monopolistic Competition, Increasing Returns, and the Effects of Government Spending," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 28(2), pages 233-54, May.
  17. Karras, Georgios, 1994. "Government Spending and Private Consumption: Some International Evidence," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 26(1), pages 9-22, February.
  18. Phillips, Peter & Sul, Donggyu, 2002. "Dynamic Panel Estimation and Homogenity Testing Under Cross Section Dependence," Working Papers 194, Department of Economics, The University of Auckland.
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