Consumer confidence as a GDP determinant in New EU Member States: a view from a time-varying perspective

Petar Sorić

Empirica, 2018, vol. 45, issue 2, No 3, 282 pages

Abstract: Abstract This paper offers a pioneer attempt to unveil the time-varying impact of consumer confidence on GDP growth. The empirical analysis is based on a state space model with time-varying coefficients, which is employed on a dataset from 11 New EU Member States. It is shown that the impact of consumer confidence (reflecting the overall uncertainty level in the country) skyrockets in the 2008 Great Recession, providing evidence that the recent crisis was to some extent psychologically governed. After that, the influence of consumer confidence on GDP mostly stabilizes at earlier levels. The EU accession seems not to play an important role in the observed relationship. The obtained conclusions are quite robust across countries and remain intact upon the inclusion of additional control variables in the model. A possible solution for keeping the psychological determinants of the crisis under control is a prompt, coherent, and clearly communicated crisis management policy, which might help preventing a momentous drop of consumer confidence and overall uncertainty.

Keywords: Consumer confidence; Business and consumer surveys; State space models; Time-varying coefficients (search for similar items in EconPapers)
JEL-codes: C32 E03 E32 G01 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (16)

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DOI: 10.1007/s10663-016-9360-4

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