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Introducing a New Index of Households' Macroeconomic Conditions

Author

Listed:
  • Martin Hodula
  • Simona Malovana
  • Jan Frait

Abstract

We construct a novel index of households' macroeconomic conditions for 22 high-income European countries between 2002 Q1 and 2018 Q4. The resulting index is in line with the broad features of the countries' business cycles and captures households' economic well-being. We discuss the complementary character of the proposed index in relation to widely employed survey-based consumer confidence indicators. We show that households' expectations are tightly linked to current macroeconomic conditions. This finding echoes the literature linking consumer attitudes and economic development. In a single-country case study, we provide empirical evidence that links the proposed index to new credit extended to households. The evidence suggests that households need a longer period of good macroeconomic conditions to decide to take on a mortgage than they do in the case of a consumer loan.

Suggested Citation

  • Martin Hodula & Simona Malovana & Jan Frait, 2019. "Introducing a New Index of Households' Macroeconomic Conditions," Working Papers 2019/10, Czech National Bank.
    • Handle: RePEc:cnb:wpaper:2019/10
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    File URL: https://www.cnb.cz/export/sites/cnb/en/economic-research/.galleries/research_publications/cnb_wp/cnbwp_2019_10.pdf
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    References listed on IDEAS

    as
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    Cited by:

    1. Rakovská, Zuzana, 2021. "Composite survey sentiment as a predictor of future market returns: Evidence for German equity indices," International Review of Economics & Finance, Elsevier, vol. 73(C), pages 473-495.

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    More about this item

    Keywords

    Composite index; factor analysis; households' confidence; loan growth;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

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