The Usefulness of Consumer Confidence Indexes in the United States

Brigitte Desroches and Marc-André Gosselin

Staff Working Papers from Bank of Canada

Keywords: Domestic demand and components; Economic models; International topics (search for similar items in EconPapers)
JEL-codes: D12 E21 E27 (search for similar items in EconPapers)
Pages: 34 pages Abstract: This paper assesses the usefulness of consumer confidence indexes in forecasting aggregate consumer spending in the United States. The literature generally dismisses the relevance of these indexes. Without formal modelling, however, some researchers (Garner 1991 and Throop 1992) suggest that the indexes could be helpful during periods of major economic or political shocks. Such periods are usually associated with high volatility of consumer confidence, suggesting that large swings in confidence could be useful indicators of consumption. Our work distinguishes itself from previous research in that we provide a rigorous assessment of this possibility by estimating a consumption function in which only large variations of confidence can affect spending. Our results show that economists and forecasters should pay attention to consumer confidence, especially in times of elevated economic or political uncertainty.
Date: 2002
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Citations: View citations in EconPapers (21)

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Persistent link: https://EconPapers.repec.org/RePEc:bca:bocawp:02-22

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