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Economic conditions and confidence: Do changes in the consumption level affect the dynamics of confidence?

Author

Listed:
  • Nicolas Gérard Vaillant

    (ETHICS EA 7446 - Experience ; Technology & Human Interactions ; Care & Society : - ICL - Institut Catholique de Lille - UCL - Université catholique de Lille)

  • Véronique Flambard

    (LEM - Lille économie management - UMR 9221 - UA - Université d'Artois - UCL - Université catholique de Lille - Université de Lille - CNRS - Centre National de la Recherche Scientifique, UCL FGES - Université Catholique de Lille - Faculté de gestion, économie et sciences - ICL - Institut Catholique de Lille - UCL - Université catholique de Lille, ICL - Institut Catholique de Lille - UCL - Université catholique de Lille)

Abstract

People are consumers and voters. Their sentiment about the economy and the competence of their leaders determine their confidence level. This research note investigates whether economic conditions measured by changes in the recent consumption level modify the dynamics of confidence formation. Using French monthly economic and political data (from May 1988 to April 2010), we test this assumption with a threshold vector autoregression model. We show that changes in consumption do not alter the strength or direction of causality between consumer sentiment and political confidence. There is no evident effect of the state of the economy on confidence dynamics. It does not require special treatments by forecasters everything else equal.

Suggested Citation

  • Nicolas Gérard Vaillant & Véronique Flambard, 2015. "Economic conditions and confidence: Do changes in the consumption level affect the dynamics of confidence?," Post-Print hal-04511120, HAL.
    • Handle: RePEc:hal:journl:hal-04511120
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    References listed on IDEAS

    as
    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. Hansen, Bruce E, 1996. "Inference When a Nuisance Parameter Is Not Identified under the Null Hypothesis," Econometrica, Econometric Society, vol. 64(2), pages 413-430, March.
    3. Atanasova Christina, 2003. "Credit Market Imperfections and Business Cycle Dynamics: A Nonlinear Approach," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 7(4), pages 1-22, December.
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    More about this item

    JEL classification:

    • E0 - Macroeconomics and Monetary Economics - - General
    • H7 - Public Economics - - State and Local Government; Intergovernmental Relations

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