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What Does Really Drive Consumer Confidence?

Simona Malovana (), Martin Hodula and Jan Frait ()

Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, 2021, vol. 155, issue 3, No 6, 885-913

Abstract: Abstract We construct a novel index of households’ macroeconomic environment (HOME) based on the data from 22 high-income European countries between 2002 Q1 and 2018 Q4. The resulting index is in line with the broad features of the countries’ business and financial cycles and captures well households’ perception of their underlying economic situation. We discuss joint properties of the HOME index and the widely employed survey-based consumer confidence indicator. We show that households’ expectations are tightly linked to current macroeconomic conditions. This finding echoes the literature linking consumer attitudes and actual economic developments. The HOME index also reflects the importance of asset prices and lending conditions for households’ behavior. In a single-country case study, we provide empirical evidence that links the proposed index to new credit extended to households. The evidence suggests that households need a longer period of good macroeconomic conditions to decide to take on a mortgage than they do in the case of a consumer loan.

Keywords: Composite index; Factor analysis; Households’ confidence; Loan growth (search for similar items in EconPapers)
JEL-codes: F12 F41 F43 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1007/s11205-021-02626-6

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