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Consumer confidence and rational expectations in the United States compared with the United Kingdom

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  • Charles Delorme
  • David Kamerschen
  • Lisa Ford Voeks

Abstract

This paper examines the relationship between consumer confidence and the Rational Expectations Permanent Income Hypothesis in the USA and compares the results with those obtained for the UK. The study expands previous analysis by defining consumption as motor vehicles, goods excluding motor vehicles, and services. The results suggest that predictive ability of the USA's consumer confidence is less than that of the UK, but that contrary to the UK study, confidence does not predict future consumption growth of services and is therefore consistent with Rational Expectations Permanent Income Hypothesis.

Suggested Citation

  • Charles Delorme & David Kamerschen & Lisa Ford Voeks, 2001. "Consumer confidence and rational expectations in the United States compared with the United Kingdom," Applied Economics, Taylor & Francis Journals, vol. 33(7), pages 863-869.
    • Handle: RePEc:taf:applec:v:33:y:2001:i:7:p:863-869
    DOI: 10.1080/00036840122192
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    Cited by:

    1. Karl Taylor & Robert McNabb, 2007. "Business Cycles and the Role of Confidence: Evidence for Europe," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 69(2), pages 185-208, April.
    2. Thomas Lux & Jaba Ghonghadze, 2011. "Modeling the Dynamics of EU Economic Sentiment Indicators: An Interaction-Based Approach," Post-Print hal-00711445, HAL.
    3. Antonio Caleiro, 2006. "How is confidence related to unemployment in Portugal?," Applied Economics Letters, Taylor & Francis Journals, vol. 13(13), pages 887-890.
    4. Olorunsola Emmanuel Olowofeso & Sani Ibrahim Doguwa, 2015. "Consumer confidence indices and short-term forecasting of consumption for Nigeria," IFC Bulletins chapters, in: Bank for International Settlements (ed.), Indicators to support monetary and financial stability analysis: data sources and statistical methodologies, volume 39, Bank for International Settlements.
    5. Sarah Gelper & Aurelie Lemmens & Christophe Croux, 2007. "Consumer sentiment and consumer spending: decomposing the Granger causal relationship in the time domain," Applied Economics, Taylor & Francis Journals, vol. 39(1), pages 1-11.
    6. Gelper, S. & Lemmens, A. & Croux, C., 2007. "Consumer sentiment and consumer spending : Decomposing the granger causal relationship in the time domain," Other publications TiSEM 55ac7230-2985-41f1-a42c-7, Tilburg University, School of Economics and Management.
    7. Hassan Gholipour Fereidouni & Reza Tajaddini, 2017. "Housing Wealth, Financial Wealth and Consumption Expenditure: The Role of Consumer Confidence," The Journal of Real Estate Finance and Economics, Springer, vol. 54(2), pages 216-236, February.
    8. Roberto Golinelli & Giuseppe Parigi, 2003. "What is this thing called confidence? A comparative analysis of consumer confidence indices in eight major countries," Temi di discussione (Economic working papers) 484, Bank of Italy, Economic Research and International Relations Area.
    9. Tugrul Gurgur & Zubeyir Kilinc, 2015. "What Drives the Consumer Confidence in Turkey?," CBT Research Notes in Economics 1517, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
    10. Martin Hodula & Simona Malovana & Jan Frait, 2019. "Introducing a New Index of Households' Macroeconomic Conditions," Working Papers 2019/10, Czech National Bank.
    11. Sell, Friedrich L., 2004. "Confidence and the Erosion of Confidence: Economic Functions and Effects," Working Papers in Economics 2004,1, Bundeswehr University Munich, Economic Research Group.
    12. António Bento Caleiro, 2021. "Learning to Classify the Consumer Confidence Indicator (in Portugal)," Economies, MDPI, vol. 9(3), pages 1-12, September.
    13. Sell, Friedrich L., 2002. "Optimism, pessimism and the unforeseen: Modelling an endogenous business cycle driven by strong beliefs," Working Papers in Economics 2002,1, Bundeswehr University Munich, Economic Research Group.
    14. Atsuo Utaka, 2003. "Confidence and the real economy - the Japanese case," Applied Economics, Taylor & Francis Journals, vol. 35(3), pages 337-342.
    15. Ghonghadze, Jaba & Lux, Thomas, 2009. "Modeling the dynamics of EU economic sentiment indicators: an interaction-based approach," Kiel Working Papers 1487, Kiel Institute for the World Economy (IfW Kiel).
    16. Simona Malovaná & Martin Hodula & Jan Frait, 2021. "What Does Really Drive Consumer Confidence?," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 155(3), pages 885-913, June.

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