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Business Cycles and the Role of Confidence: Evidence from Europe

  • Bob McNabb
  • Karl Taylor


Using an under-utilised dataset on consumer and business confidence indicators across the UK, France, Italy and the Netherlands, this paper considers the extent to which such indicators are linked to GDP and the business cycle. We adopt, cross correlation descriptive statistics, Granger causality tests, variance decomposition, and forecast probit tests to investigate the properties of the data. In general consumer and business confidence indicators are leading indicators and pro-cyclical. There is some evidence of causality between the indicators and GDP and confidence indicators would appear to have good predictive power of cycle turning points in relation to other leading indicators.

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Paper provided by Department of Economics, University of Leicester in its series Discussion Papers in Economics with number 02/3.

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Date of creation: Feb 2002
Date of revision:
Handle: RePEc:lec:leecon:02/3
Contact details of provider: Postal: Department of Economics University of Leicester, University Road. Leicester. LE1 7RH. UK
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