Psychology, consumer sentiment and household expenditures: a disaggregated analysis

Malgarini, Marco and Margani, Patrizia (2005): Psychology, consumer sentiment and household expenditures: a disaggregated analysis.

Abstract

The aim of the paper is to assess the role of the Italian Consumer Sentiment Index (CSI) as an autonomous driving force of consumption decisions. We test for the presence of “rule of thumb” consumers as originally proposed by Cambell and Mankiw (1991), using sentiment measures distinguished by working condition of the household. Consumption data are disaggregated according to durability. The role of sentiment results to be stronger for service expenditures. Psychological motives of employees are found to have a particularly significant influence on consumption decisions. Moreover, CSI can not be explained by economic fundamentals alone, capturing also the effects of the political cycle and exceptional circumstances.

• Item Type: MPRA Paper
• Language: English
• Keywords: Consumer sentiment, Permanent Income hypothesis, excess sensitivity, psychological approach, heterogeneity of individuals
• Subjects: E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E32 - Business Fluctuations ; Cycles; E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E21 - Consumption ; Saving ; Wealth

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