Can Consumer Sentiment and Its Components Forecast Australian GDP and Consumption?

Chew Chua and Sarantis Tsiaplias

Melbourne Institute Working Paper Series from Melbourne Institute of Applied Economic and Social Research, The University of Melbourne

Abstract: This paper examines whether the disaggregation of consumer sentiment data into its sub-components improves the real-time capacity to forecast GDP and consumption. A Bayesian error correction approach augmented with the consumer sentiment index and permutations of the consumer sentiment sub-indexes is used to evaluate forecasting power. The forecasts are benchmarked against both composite forecasts and forecasts from standard error correction models. Using Australian data, we find that consumer sentiment data increases the accuracy of GDP and consumption forecasts, with certain components of consumer sentiment consistently providing better forecasts than aggregate consumer sentiment data.

Keywords: Bayesian; Composite forecast; Consumer sentiment; Cointegration. (search for similar items in EconPapers)
JEL-codes: C11 C32 E27 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2008-02
New Economics Papers: this item is included in nep-for and nep-mac
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Related works:
Journal Article: Can consumer sentiment and its components forecast Australian GDP and consumption? (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:iae:iaewps:wp2008n03

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