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Does consumer confidence forecast household expenditure? a sentiment index horse race

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This article is the first formal investigation of consumer attitudes that compares the forecasting power of the University of Michigan's Index of Consumer Sentiment and the Conference Board's Consumer Confidence Index. The authors find that measures available from the Conference Board have both economically and statistically significant explanatory power for several categories of consumer spending. By contrast, measures available from the University of Michigan generally exhibit weaker forecasting power for most categories of spending. As part of their analysis, the authors examine the ways in which the surveys underlying these measures differ and test whether certain types of survey questions are particularly important for predicting consumer spending.

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  • Jason Bram & Sydney C. Ludvigson, 1998. "Does consumer confidence forecast household expenditure? a sentiment index horse race," Economic Policy Review, Federal Reserve Bank of New York, vol. 4(Jun), pages 59-78.
    • Handle: RePEc:fip:fednep:y:1998:i:jun:p:59-78:n:v.4no.2
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    1. Carroll, Christopher D & Fuhrer, Jeffrey C & Wilcox, David W, 1994. "Does Consumer Sentiment Forecast Household Spending? If So, Why?," American Economic Review, American Economic Association, vol. 84(5), pages 1397-1408, December.
    2. Mankiw, N. Gregory, 1982. "Hall's consumption hypothesis and durable goods," Journal of Monetary Economics, Elsevier, vol. 10(3), pages 417-425.
    3. Matsusaka, John G & Sbordone, Argia M, 1995. "Consumer Confidence and Economic Fluctuations," Economic Inquiry, Western Economic Association International, vol. 33(2), pages 296-318, April.
    4. Eric M. Leeper, 1992. "Consumer attitudes: king for a day," Economic Review, Federal Reserve Bank of Atlanta, issue Jul, pages 1-15.
    5. Wilcox, David W, 1992. "The Construction of U.S. Consumption Data: Some Facts and Their Implications for Empirical Work," American Economic Review, American Economic Association, vol. 82(4), pages 922-941, September.
    6. Sydney C. Ludvigson, 1996. "Consumer sentiment and household expenditure: reevaluating the forecasting equations," Research Paper 9636, Federal Reserve Bank of New York.
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    Consumption (Economics); Consumer behavior;

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