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Economic sentiment as a driver for household financial behavior

Author

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  • Białowolski, Piotr

Abstract

The study focused on investigating influence of economic sentiments on household financial decisions. A group of Polish households participated simultaneously in a longitudinal study on financial behavior and a consumer tendency survey. Combination of responses from the two surveys was used to investigate a link between economic situation assessment and household financial decisions. With the use of latent class modeling five distinct patterns of saving behavior and six distinct patterns of borrowing behavior were identified among respondents. Patterns in both these domains were confirmed as stable in time. Subsequently, with the use of individual data, a link between indicators from the consumer tendency survey and the evolution of household financial behavior in the domains of borrowing and savings was established. Consumer confidence stimulated debt for durables and mortgages but reduced debt uptake for unexpected expenditures or consumption purposes. Lower consumer confidence increased only likelihood of saving for consumption, confirming the precautionary motive of saving. Multi-purpose and home renovation savings both correlated positively with consumer confidence.

Suggested Citation

  • Białowolski, Piotr, 2019. "Economic sentiment as a driver for household financial behavior," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 80(C), pages 59-66.
    • Handle: RePEc:eee:soceco:v:80:y:2019:i:c:p:59-66
    DOI: 10.1016/j.socec.2019.03.006
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    Cited by:

    1. Zrinka Lukac & Mirjana Cizmesija, 2021. "(Re)Constructing the European Economic Sentiment Indicator: An Optimization Approach," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 155(3), pages 939-958, June.

    More about this item

    Keywords

    Consumer economic sentiment; Financial decisions; Latent class analysis; Latent transition analysis; PsycINFO: 2229; 3920;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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