Why Does Consumer Sentiment Predict Household Spending
Year: 2003
Type: preprint
Abstract: Consumer sentiment may predict future household spending, either because sentiment is an independent causal force or because it foreshadows current economic conditions. The empirical evidence we present favors the second interpretation. The evidence in previous research that favors the first interpretation is not robust because the analysis failed to control for the possible influences of expected changes in income and interest rates on consumer spending. Consumer sentiment foreshadows current expectations about the economy as well as about interest rates, suggesting that it is useful as a barometer of the near-term outlook for spending.
Source: SSRN Electronic Journal
Authors: Yash P. Mehra, Elliot Martin
Institutions: Federal Reserve, Federal Reserve Bank of Richmond
Language: English
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2157169249