IDEAS home Printed from https://ideas.repec.org/a/wsi/acsxxx/v08y2005i02n03ns0219525905000452.html
   My bibliography  Save this article

Consumer Behavior And Fluctuations In Economic Activity

Author

Listed:
  • FRANK H. WESTERHOFF

    (University of Osnabrück, Department of Economics, Rolandstraße 8, D-49069 Osnabrück, Germany)

Abstract

We develop a simple Keynesian type business cycle model in which heterogeneous agents are either optimistic or pessimistic. If the majority of the agents are optimistic, then consumption expenditures are high and the economy booms, otherwise consumption expenditures are low and the economy is in a recession. Within our model, the sentiment of the agents is affected by their social interactions. For instance, people regularly meet each other and thus their mood may change. Overall, our model suggests that swings in consumer confidence may generate irregular fluctuations in economic activity.

Suggested Citation

  • Frank H. Westerhoff, 2005. "Consumer Behavior And Fluctuations In Economic Activity," Advances in Complex Systems (ACS), World Scientific Publishing Co. Pte. Ltd., vol. 8(02n03), pages 209-215.
    • Handle: RePEc:wsi:acsxxx:v:08:y:2005:i:02n03:n:s0219525905000452
    DOI: 10.1142/S0219525905000452
    as

    Download full text from publisher

    File URL: http://www.worldscientific.com/doi/abs/10.1142/S0219525905000452
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://libkey.io/10.1142/S0219525905000452?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    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.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Frank Westerhoff & Martin Hohnisch, 2010. "Consumer sentiment and countercyclical fiscal policies," International Review of Applied Economics, Taylor & Francis Journals, vol. 24(5), pages 609-618.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Lenka Mynaříková & Vít Pošta, 2023. "The Effect of Consumer Confidence and Subjective Well-being on Consumers’ Spending Behavior," Journal of Happiness Studies, Springer, vol. 24(2), pages 429-453, February.
    2. Erik Kole & Liesbeth Noordegraaf-Eelens & Bas Vringer, 2019. "Cognitive Biases and Consumer Sentiment," Tinbergen Institute Discussion Papers 19-031/I, Tinbergen Institute, revised 21 Mar 2023.
    3. Thomas Lux & Jaba Ghonghadze, 2011. "Modeling the Dynamics of EU Economic Sentiment Indicators: An Interaction-Based Approach," Post-Print hal-00711445, HAL.
    4. Kevin Moran & Simplice Aimé Nono & Imad Rherrad, 2018. "Forecasting with Many Predictors: How Useful are National and International Confidence Data?," Cahiers de recherche 1814, Centre de recherche sur les risques, les enjeux économiques, et les politiques publiques.
    5. Juan Carlos Cuestas & Luis A. Gil-Alana & Karl Taylor, 2016. "Inflation convergence in Central and Eastern Europe vs. the Eurozone: Non-linearities and long memory," Scottish Journal of Political Economy, Scottish Economic Society, vol. 63(5), pages 519-538, November.
    6. Aneta Maria Kłopocka, 2017. "Does Consumer Confidence Forecast Household Saving and Borrowing Behavior? Evidence for Poland," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 133(2), pages 693-717, September.
    7. Ioannis Chatziantoniou & Stavros Degiannakis & Bruno Eeckels & George Filis, 2016. "Forecasting tourist arrivals using origin country macroeconomics," Applied Economics, Taylor & Francis Journals, vol. 48(27), pages 2571-2585, June.
    8. Marina Matosec & Zdenka Obuljen Zoricic, 2019. "Identifying the Interdependence between Consumer Confidence and Macroeconomic Developments in Croatia," Interdisciplinary Description of Complex Systems - scientific journal, Croatian Interdisciplinary Society Provider Homepage: http://indecs.eu, vol. 17(2-B), pages 345-354.
    9. Massimo Ferrari Minesso & Laura Lebastard & Helena Mezo, 2023. "Text-Based Recession Probabilities," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 71(2), pages 415-438, June.
    10. Uju Violet Alola & Darya Baeva & Andrew Adewale Alola, 2023. "Determining the (A)symmetric Role of Business–Consumer Confidence in Outward–Inward Tourism in Russia: A Competitiveness Perspective," International Journal of Global Business and Competitiveness, Springer, vol. 18(1), pages 22-34, June.
    11. Lee, Kiryoung & Jeon, Yoontae, 2020. "Measuring Chinese consumers’ perceived uncertainty," International Review of Economics & Finance, Elsevier, vol. 66(C), pages 51-70.
    12. Sudeshna Ghosh, 2021. "Business Confidence and Business Tourism in Japan," Journal of International Commerce, Economics and Policy (JICEP), World Scientific Publishing Co. Pte. Ltd., vol. 12(01), pages 1-23, February.
    13. Pablo Castellanos García & Indalecio Pérez Díaz del Río & Jose Manuel Sanchez-Santos, 2014. "The role of confidence in the evolution of the Spanish economy: empirical evidence from an ARDL model," European Journal of Government and Economics, Europa Grande, vol. 3(2), pages 148-161, December.
    14. Lux, Thomas, 2008. "Rational forecasts or social opinion dynamics? Identification of interaction effects in a business climate survey," Kiel Working Papers 1424, Kiel Institute for the World Economy (IfW Kiel).
    15. Nicoletta Pashourtidou & Andreas Tsiaklis, 2011. "An Analysis of Firms’ Expectations about Activity and Employment," Cyprus Economic Policy Review, University of Cyprus, Economics Research Centre, vol. 5(1), pages 71-85, June.
    16. Konstantinou, Panagiotis & Tagkalakis, Athanasios, 2011. "Boosting confidence: Is there a role for fiscal policy?," Economic Modelling, Elsevier, vol. 28(4), pages 1629-1641, July.
    17. Anja Sebbesen & Harald Oberhofer, 2018. "The Propagation of Business Sentiment within the European Union?," WIFO Working Papers 549, WIFO.
    18. Mark J. Holmes & Brian Silverstone, 2010. "Business confidence and cyclical turning points: a Markov-switching approach," Applied Economics Letters, Taylor & Francis Journals, vol. 17(3), pages 229-233, February.
    19. Gene Ambrocio, 2022. "Euro-area business confidence and COVID-19," Applied Economics, Taylor & Francis Journals, vol. 54(43), pages 4915-4929, September.
    20. Taylor, Karl & Bhadury, Soumya & Binner, Jane & Mandal, Anandadeep, 2024. "Business Cycle Turning Points and Local Labour Markets," IZA Discussion Papers 17153, Institute of Labor Economics (IZA).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wsi:acsxxx:v:08:y:2005:i:02n03:n:s0219525905000452. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Tai Tone Lim (email available below). General contact details of provider: http://www.worldscinet.com/acs/acs.shtml .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.