Consumer Sentiment and Australian Consumer Spending
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Author
Loundes, J.; Scutella, R.Date
2000-11Affiliation
Economics and Commerce: Melbourne Institute of Applied Economic and Social ResearchMetadata
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Loundes, Joanne and Scutella, Rosanna (2000) Consumer Sentiment and Australian Consumer Spending.Access Status
Open AccessAbstract
There is a growing literature that seeks to analyse the relationship between consumer sentiment and economic variables, primarily because of the pervasive belief that consumers' opinions and expectations can influence the direction of-or signal changes in the direction of-the economy. There has been little previous empirical work on Australian consumer sentiment, either in determining its explanatory power, or examining the factors that influence consumer sentiment. This research aims to fill part of this gap by providing a clearer understanding of the relationship between consumer attitudes and 'real' economic variables. Specifically, the predictive power of the consumer sentiment index for consumption will be examined using the methods proposed in Carroll, Fuhrer and Wilcox (1994). Private consumption expenditure accounts for a large proportion of GDP; hence, early detection of possible shifts in consumer spending could assist policy makers in smoothing out the business cycle. Our results suggest that the causal relationship between consumption and sentiment in Australia is more complicated than what Carroll et al suggest, and that the behaviour of consumption in Australia looks more like the permanent income hypothesis than it does in the US.
Keywords
consumer sentiment; index for consumption; Australian consumer attitudesExport Reference in RIS Format
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