Is Discrepancy between Confidence and Spending Driven by Pessimism or by High Aspriations? – Review of the Discrepancy between the Admitted Financial Situation and Actual Spending in Hungary

Csongor Hajdu ()
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Csongor Hajdu: Faculty of Social Sciences, Corvinus University of Budapest, Budapest

Society and Economy, 2017, vol. 39, issue 2, 233-250

Abstract: The opinions of people are expected to forecast their actions, and even major economic institutions rely on this correlation. This research paper examines a case when the opinion of people about their financial situation contradicts their financial-related actions. In 2012 in Hungary the general opinion of people about their financial situation was showing the lowest confidence in the world, with a significant declining trend, reaching an extremely low level. Although the general expectation would be that this pessimism triggers a set-back in consumer spending, figures show that Hungarians were on the other end of the scale regarding their expenditures and were greatly increasing their spending. This raises the question: why do people say they are in such a tough financial situation yet instead of saving they increase their spending? This paper presents a cross-country analysis that reviews the severity of this discrepancy, as well as proves the validity of the question by excluding several alternative explanations, followed by a recommendation and hypotheses for a detailed research to explain the phenomenon.

Keywords: income; spending; savings; confi dence; benchmarks (search for similar items in EconPapers)
JEL-codes: D12 E21 H30 (search for similar items in EconPapers)
Date: 2017
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