What is it about?

This paper compares the predictive capability of different measures of consumer confidence with respect to the growth of household consumption expenditure. Evidence is obtained from quarterly data on five European countries.

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Why is it important?

Results are obtained through applying the Model Confidence Set procedure, as well as pairwise MSE-t tests. The ability to distinguish between the forecasting performance of measures of consumer confidence is found to depend upon the variability that is exhibited by household consumption. When using the 5 per cent level of significance, the European Commission's favoured Consumer Confidence Indicator cannot be classed as inferior to any of its rivals.

Perspectives

My previous research on this subject matter had been limited to one country (the UK) and involved fairly routine statistical methods. In this study, I was pleased to analyse data on several countries using a relatively modern technique, namely the Model Confidence Set procedure.

Robert Gausden
University of Portsmouth

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This page is a summary of: Comparative performances of measures of consumer and economic sentiment in forecasting consumption: a multi-country analysis, Applied Economics, September 2019, Taylor & Francis, DOI: 10.1080/00036846.2019.1659489.
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