Exogenous shocks and consumer confidence in four major european countries

The relationship between consumers' opinions as proxied by a survey-based confidence index and measurable economic variables in 4 major European Community countries (the UK, Germany, France, and Italy) is examined. Of interest is the impact of foreign factors, such as the oil price and the exch...

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Bibliographic Details
Published in:Applied economics 1988-04, Vol.20 (4), p.561-567
Main Authors: Praet, Peter, Vuchelen, Jef
Format: Article
Language:English
Subjects:
Confidence
Consumer
Economic models
Forecasting
Oil
Opinions
Polls & surveys
Prices
Statistical analysis
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Summary:The relationship between consumers' opinions as proxied by a survey-based confidence index and measurable economic variables in 4 major European Community countries (the UK, Germany, France, and Italy) is examined. Of interest is the impact of foreign factors, such as the oil price and the exchange rate. The period examined is 1973-1985 for Germany and France, and 1974-1985 for the UK and Italy. The econometric results are satisfactory, taking into account the fact that the variables are specified as quarterly changes. In the part of the forecasting exercise that covers a period of rapidly declining oil prices, the equations do not perform well, except for Italy and the UK. The forecast results match, to some extent, the forecast errors of Western economies for the first half of 1986. The forecasters took a mechanistic approach to the effects of oil price changes on the economy. Both forecast exercises indicate that economic agents did not react rapidly to the recent oil price changes.
ISSN:0003-6846
1466-4283
DOI:10.1080/00036848800000065