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How Should We Measure Consumer Confidence (Sentiment)? Evidence from the Michigan Survey of Consumers

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  • Jeff Dominitz
  • Charles F. Manski

Abstract

The Michigan Index of Consumer Sentiment (ICS) and other indices of consumer confidence are prominent in public discourse on the economy but have little presence in modern economic research. The sparsity of modern research follows an earlier period when economists scrutinized in some depth the methods and data used to produce consumer confidence indices. The literature to date has focused on the predictive power of the survey data used to form the indices; there has been very little study of their micro foundations. This paper analyzes the responses to eight expectations questions that have appeared on the Michigan Survey of Consumers in the period June 2002 through May 2003. Four questions elicit micro and macroeconomic expectations in the traditional qualitative manner; two are components of the ICS. Four questions use a percent chance' format to elicit subjective probabilities of micro and macroeconomic events; versions of these questions have previously appeared in the Survey of Economic Expectations.

Suggested Citation

  • Jeff Dominitz & Charles F. Manski, 2003. "How Should We Measure Consumer Confidence (Sentiment)? Evidence from the Michigan Survey of Consumers," NBER Working Papers 9926, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:9926
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    References listed on IDEAS

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    1. 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.
    2. J. Dominitz & C. F. Manski, "undated". "Perceptions of Economic Insecurity: Evidence from the Survey of Economic Expectations," Institute for Research on Poverty Discussion Papers 1105-96, University of Wisconsin Institute for Research on Poverty.
    3. Dominitz, Jeff, 2001. "Estimation of income expectations models using expectations and realization data," Journal of Econometrics, Elsevier, vol. 102(2), pages 165-195, June.
    4. Caskey, John P, 1985. "Modeling the Formation of Price Expectations: A Bayesian Approach," American Economic Review, American Economic Association, vol. 75(4), pages 768-776, September.
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    Citations

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    Cited by:

    1. Todd Stinebrickner & Ralph Stinebrickner, 2012. "Learning about Academic Ability and the College Dropout Decision," Journal of Labor Economics, University of Chicago Press, vol. 30(4), pages 707-748.
    2. Maurizio Bovi, 2005. "Consumers Sentiment and Cognitive Macroeconometrics Paradoxes and Explanations," Macroeconomics 0512002, EconWPA.
    3. Charles F. Manski, 2017. "Survey Measurement of Probabilistic Macroeconomic Expectations: Progress and Promise," NBER Chapters,in: NBER Macroeconomics Annual 2017, volume 32 National Bureau of Economic Research, Inc.
    4. Jeff Dominitz & Charles F. Manski, 2011. "Measuring and interpreting expectations of equity returns," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 26(3), pages 352-370, April.
    5. Dudek, Sławomir, 2008. "Consumer Survey Data and short-term forecasting of households consumption expenditures in Poland," MPRA Paper 19818, University Library of Munich, Germany.
    6. Giselle Guzmán, 2009. "Using Sentiment Surveys to Predict GDP Growth and Stock Returns," Chapters,in: The Making of National Economic Forecasts, chapter 12 Edward Elgar Publishing.
    7. Gerunov, Anton, 2013. "Връзка Между Икономическите Очаквания И Стопанската Динамика В Ес-27
      [Linkages Between Expectations and Economic Dynamics in EU-27]
      ," MPRA Paper 68795, University Library of Munich, Germany.
    8. Loría, Eduardo & Brito, L., 2004. "Is the Consumer Confidence Index a Sound Predictor of the Private Demand in the United States?," Estudios de Economía Aplicada, Estudios de Economía Aplicada, vol. 22, pages 1-15, Diciembre.
    9. Todd Stinebrickner & Ralph Stinebrickner, 2011. "Math or Science? Using Longitudinal Expectations Data to Examine the Process of Choosing a College Major," University of Western Ontario, Centre for Human Capital and Productivity (CHCP) Working Papers 20111, University of Western Ontario, Centre for Human Capital and Productivity (CHCP).
    10. Guzman, Giselle C., 2008. "Using sentiment to predict GDP growth and stock returns," MPRA Paper 36505, University Library of Munich, Germany.

    More about this item

    JEL classification:

    • D1 - Microeconomics - - Household Behavior
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty

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