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Confidence and Unemployment in the European Union: A lesson from the 2004 enlargement

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  • António Caleiro

    (Departamento de Economia, Universidade de Évora)

Abstract

We use data for the monthly unemployment rate and consumer confidence indicator in the European Union to study whether there is a relationship between unemployment and confidence. Our estimation method is based on a fuzzy logic methodology with a Gaussian membership function. We find a stronger relationship between unemployment and confidence than it is apparent. We show in an ex-post prediction study that this relationship did not change, in a significant way, after the 2004 enlargement of the European Union. This fact constitutes a lesson for the post-2007 enlargement period. The link between unemployment and confidence has important policy implications given its relevance, in particular for the (latest call for a new start of the) Lisbon Strategy.

Suggested Citation

  • António Caleiro, 2007. "Confidence and Unemployment in the European Union: A lesson from the 2004 enlargement," Notas Económicas, Faculty of Economics, University of Coimbra, issue 26, pages 15-26, December.
    • Handle: RePEc:gmf:journl:y:2007:i:26:p:15-26
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    References listed on IDEAS

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    1. 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.
    2. James E. West & Bruce Linster, 2003. "The Evolution of Fuzzy Rules as Strategies in Two-Player Games," Southern Economic Journal, John Wiley & Sons, vol. 69(3), pages 705-717, January.
    3. Sydney C. Ludvigson, 2004. "Consumer Confidence and Consumer Spending," Journal of Economic Perspectives, American Economic Association, vol. 18(2), pages 29-50, Spring.
    4. Atsuo Utaka, 2003. "Confidence and the real economy - the Japanese case," Applied Economics, Taylor & Francis Journals, vol. 35(3), pages 337-342.
    5. Annabelle Mourougane & Moreno Roma, 2003. "Can confidence indicators be useful to predict short term real GDP growth?," Applied Economics Letters, Taylor & Francis Journals, vol. 10(8), pages 519-522.
    6. Antonio Caleiro, 2006. "How is confidence related to unemployment in Portugal?," Applied Economics Letters, Taylor & Francis Journals, vol. 13(13), pages 887-890.
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    Cited by:

    1. Wei-fong Pan, 2018. "Unemployment and confidence in Canada: Evidence from national and regional level data," Economics Bulletin, AccessEcon, vol. 38(2), pages 1111-1123.
    2. António Bento Caleiro, 2021. "Learning to Classify the Consumer Confidence Indicator (in Portugal)," Economies, MDPI, vol. 9(3), pages 1-12, September.

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    More about this item

    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • C82 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Macroeconomic Data; Data Access
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination

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