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Does Consumer Confidence Forecast Household Expenditure? A Sentiment Index Horse Race, Research Paper 9708

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Does Consumer Confidence Forecast Household Expenditure? A Sentiment Index Horse Race, Research Paper 9708

DATE: March 1997

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ABSTRACT: This paper investigates the forecasting power of consumer sentiment for household expenditure. We compare the predictive power of two measures of consumer attitudes, and then further compare each survey's expectations component with one another, and with the broader sentiment measures. The results indicate that lagged values of the Conference Board's overall confidence and expectations measures have stronger incremental power for more categories of the growth in consumption expenditure than do measures available from the University of Michigan, though the latter is correlated with future expenditures on automobiles even after economic fundamentals are controlled for. The paper also discusses structural differences between the two surveys and suggests how these differences might be related to the discrepancy in forecasting power.

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Bram, Jason and Ludvigson, Sydney C., 1964-. "Does Consumer Confidence Forecast Household Expenditure? A Sentiment Index Horse Race, Research Paper 9708," Research Papers (Federal Reserve Bank of New York) (March 1997). https://fraser.stlouisfed.org/title/6570/item/615560, accessed on March 25, 2023.

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THEMES: CLASSIFICATION:
  • lcc: HG136 .R45 no.9708
IDENTIFIERS:
  • oclc: 36797819
  • repec: fip:fednrp:9708
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