What is consumer confidence?

Jean-Paul L’Huillier, Robert Waldmann and Donghoon Yoo ()

No wp2025-09, Bank of Estonia Working Papers from Bank of Estonia

Abstract: This paper offers a structural interpretation of survey-based measures of consumer confidence. To this end, we consider a simple consumption model based on permanent income logic and estimate it using national accounts. In our framework, consumers receive noisy information about the future and make consumption decisions. Based on this setup, we construct a modelimplied measure of consumer confidence and extract it from the data. We show that the model-implied measure corresponds well to fluctuations in confidence survey data for the U.S. and a host of European countries. Our analysis provides an informational mechanism to interpret these widely used confidence indices

Keywords: Aggregate spending; confidence indices; noisy information (search for similar items in EconPapers)
JEL-codes: E21 E32 E66 (search for similar items in EconPapers)
Date: 2025-12-22, Revised 2025-12-22
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