Does Consumer Confidence Forecast Household Spending? The Euro Area Case

Dion, David Pascal (2006): Does Consumer Confidence Forecast Household Spending? The Euro Area Case.

Abstract

The following analysis, based on error correction models, suggests that consumer confidence, together with traditional macroeconomic variables, contains a forecasting and explicative power on consumption. By including consumer confidence in a consumption function, consumer confidence releases a significant coefficient. Such a confidence-augmented consumption model provides good forecasting results.

• Item Type: MPRA Paper
• Language: English
• Keywords: Consumer confidence; consumption function; forecasting; consumer attitudes and behaviour; households
• Subjects: D - Microeconomics > D1 - Household Behavior and Family Economics > D12 - Consumer Economics: Empirical Analysis; C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C53 - Forecasting and Prediction Methods ; Simulation Methods; E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E27 - Forecasting and Simulation: Models and Applications; E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E21 - Consumption ; Saving ; Wealth; D - Microeconomics > D1 - Household Behavior and Family Economics > D11 - Consumer Economics: Theory; C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C52 - Model Evaluation, Validation, and Selection

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