What Role Does Consumer Sentiment Play in the U.S. Economy?
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Tax Policy and Consumer Spending: Evidence from Japanese Fiscal Experiments
NBER WORKING PAPER SERIES TAX POLICY AND CONSUMER SPENDING: EVIDENCE FROM JAPANESE FISCAL EXPERIMENTS Katsunori Watanabe Takayuki Watababe Tsutomu Watanabe Working Paper 7252 http://www.nber.org/papers/w7252 NATIONAL BUREAU OF ECONOMIC RESEARCH 1050 Massachusetts Avenue Cambridge, MA 02138 July 1999 This paper was presented at the NBER/TCER Japan Project Meeting held in Tokyo, October 29-30, 1998. We thank Fumio Hayashi for helpful conversations and suggestions, Alan Auerbach (our discussant at the conference) and other conference participants for helpful comments, and Tomoko Katagiri for research assistance. The views expressed in this paper are those of the authors and not those of the Bank of Japan or Hitotsubashi University or the National Bureau of Economic Research. © 1999 by Katsunori Watanabe, Takayuki Watababe, and Tsutomu Watanabe . All rights reserved. Short sections of text, not to exceed two paragraphs, may be quoted without explicit permission provided that full credit, including © notice, is given to the source. Tax Policy and Consumer Spending: Evidence from Japanese Fiscal Experiments Katsunori Watanabe, Takayuki Watababe, and Tsutomu Watanabe NBER Working Paper No. 7252 July 1999 JEL No. E21, H31 ABSTRACT This paper studies the extent to which the impact of tax policy on consumer spending differs between temporary and permanent, as well as anticipated and unanticipated tax changes. To discriminate between them, we use institutional information such as legal distinction between temporary and permanent tax changes, as well as timing of policy announcement and implementation. We find that the impact of temporary changes is significantly smaller than the impact of permanent changes. We also find that more than 80 per cent of Japanese consumers, including those who distinguish between temporary and permanent tax changes, respond to tax changes at the time of their implementation and not at the time of a policy announcement. -
Chapter 17: Consumption 1
11/6/2013 Keynes’s conjectures Chapter 17: Consumption 1. 0 < MPC < 1 2. Average propensity to consume (APC) falls as income rises. (APC = C/Y ) 3. Income is the main determinant of consumption. CHAPTER 17 Consumption 0 CHAPTER 17 Consumption 1 The Keynesian consumption function The Keynesian consumption function As income rises, consumers save a bigger C C fraction of their income, so APC falls. CCcY CCcY c c = MPC = slope of the 1 CC consumption APC c C function YY slope = APC Y Y CHAPTER 17 Consumption 2 CHAPTER 17 Consumption 3 Early empirical successes: Problems for the Results from early studies Keynesian consumption function . Households with higher incomes: . Based on the Keynesian consumption function, . consume more, MPC > 0 economists predicted that C would grow more . save more, MPC < 1 slowly than Y over time. save a larger fraction of their income, . This prediction did not come true: APC as Y . As incomes grew, APC did not fall, . Very strong correlation between income and and C grew at the same rate as income. consumption: . Simon Kuznets showed that C/Y was income seemed to be the main very stable in long time series data. determinant of consumption CHAPTER 17 Consumption 4 CHAPTER 17 Consumption 5 1 11/6/2013 The Consumption Puzzle Irving Fisher and Intertemporal Choice . The basis for much subsequent work on Consumption function consumption. C from long time series data (constant APC ) . Assumes consumer is forward-looking and chooses consumption for the present and future to maximize lifetime satisfaction. Consumption function . Consumer’s choices are subject to an from cross-sectional intertemporal budget constraint, household data a measure of the total resources available for (falling APC ) present and future consumption. -
Journal of Econometrics Consumption and Labor Supply
Journal of Econometrics 147 (2008) 326–335 Contents lists available at ScienceDirect Journal of Econometrics journal homepage: www.elsevier.com/locate/jeconom Consumption and labor supply Dale W. Jorgenson a,∗, Daniel T. Slesnick b a Department of Economics, Harvard University, Cambridge, MA 02138, United States b Department of Economics, University of Texas, Austin, TX 78712, United States article info a b s t r a c t Article history: We present a new econometric model of aggregate demand and labor supply for the United States. Available online 16 September 2008 We also analyze the allocation full wealth among time periods for households distinguished by a variety of demographic characteristics. The model is estimated using micro-level data from the Consumer JEL classification: Expenditure Surveys supplemented with price information obtained from the Consumer Price Index. An C81 important feature of our approach is that aggregate demands and labor supply can be represented in D12 D91 closed form while accounting for the substantial heterogeneity in behavior that is found in household- level data. As a result, we are able to explain the patterns of aggregate demand and labor supply in the Keywords: data despite using a parametrically parsimonious specification. Consumption ' 2008 Elsevier B.V. All rights reserved. Leisure Labor Demand Supply Wages 1. Introduction employed, we impute the opportunity wages they face using the wages earned by employees. The objective of this paper is to present a new econometric Cross-sectional variation of prices and wages is considerable model of aggregate consumer behavior for the United States. The and provides an important source of information about patterns model allocates full wealth among time periods for households of consumption and labor supply. -
Shopping Enjoyment and Obsessive-Compulsive Buying
European Journal of Business and Management www.iiste.org ISSN 2222-1905 (Paper) ISSN 2222-2839 (Online) DOI: 10.7176/EJBM Vol.11, No.3, 2019 Young Buyers: Shopping Enjoyment and Obsessive-Compulsive Buying Ayaz Samo 1 Hamid Shaikh 2 Maqsood Bhutto 3 Fiza Rani 3 Fayaz Samo 2* Tahseen Bhutto 2 1.School of Business Administration, Shah Abdul Latif University, Khairpur, Sindh, Pakistan 2.School of Business Administration, Dongbei University of Finance and Economics, Dalian, China 3.Sukkur Institute of Business Administration, Sindh, Pakistan Abstract The purpose of this paper is to evaluate the relationship between hedonic shopping motivations and obsessive- compulsive shopping behavior from youngsters’ perspective. The study is based on the survey of 615 young Chinese buyers (mean age=24) and analyzed through Structural Equation Modelling (SEM). The findings show that adventure seeking, gratification seeking, and idea shopping have a positive effect on obsessive-compulsive buying, whereas role shopping and value shopping have a negative effect on obsessive-compulsive buying. However, social shopping is found to be insignificant to obsessive-compulsive buying. The study has a number of implications. Marketers should display more information about latest trends and fashions, as young buyers are found to shop for ideas and information. Managers should design the layouts with more exciting and impressive features, as these buyers are found to shop for adventure and gratification. Salesmen should take greater care into consideration while offering them to buy products such as gifts, souvenir etc. for their dear ones, as these buyers are less likely to enjoy buying for others. Moreover, business managers should less rely on discount promotions, as this consumer segment is found to be less likely to shop for discounts and bargains. -
Consumer Behaviour During Crises
Journal of Risk and Financial Management Article Consumer Behaviour during Crises: Preliminary Research on How Coronavirus Has Manifested Consumer Panic Buying, Herd Mentality, Changing Discretionary Spending and the Role of the Media in Influencing Behaviour Mary Loxton 1, Robert Truskett 1, Brigitte Scarf 1, Laura Sindone 1, George Baldry 1 and Yinong Zhao 2,* 1 Discipline of International Business, University of Sydney, Sydney, NSW 2006, Australia; [email protected] (M.L.); [email protected] (R.T.); [email protected] (B.S.); [email protected] (L.S.); [email protected] (G.B.) 2 School of Economics, Fudan University, Shanghai 200433, China * Correspondence: [email protected] Received: 24 June 2020; Accepted: 19 July 2020; Published: 30 July 2020 Abstract: The novel coronavirus (COVID-19) pandemic spread globally from its outbreak in China in early 2020, negatively affecting economies and industries on a global scale. In line with historic crises and shock events including the 2002-04 SARS outbreak, the 2011 Christchurch earthquake and 2017 Hurricane Irma, COVID-19 has significantly impacted global economic conditions, causing significant economic downturns, company and industry failures, and increased unemployment. To understand how conditions created by the pandemic to date compare to the aforementioned shock events, we conducted a thorough literature review focusing on the presentation of panic buying and herd mentality behaviours, changes to discretionary consumer spending as defined by Maslow’s Hierarchy of Needs, and the impact of global media on these behaviours. The methodology utilised to analyse panic buying, herd mentality and altered patterns of consumer discretionary spending (according to Maslow’s theory) involved an analysis of consumer spending data, largely focused on Australian and American markets. -
Demand Composition and the Strength of Recoveries†
Demand Composition and the Strength of Recoveriesy Martin Beraja Christian K. Wolf MIT & NBER MIT & NBER September 17, 2021 Abstract: We argue that recoveries from demand-driven recessions with ex- penditure cuts concentrated in services or non-durables will tend to be weaker than recoveries from recessions more biased towards durables. Intuitively, the smaller the bias towards more durable goods, the less the recovery is buffeted by pent-up demand. We show that, in a standard multi-sector business-cycle model, this prediction holds if and only if, following an aggregate demand shock to all categories of spending (e.g., a monetary shock), expenditure on more durable goods reverts back faster. This testable condition receives ample support in U.S. data. We then use (i) a semi-structural shift-share and (ii) a structural model to quantify this effect of varying demand composition on recovery dynamics, and find it to be large. We also discuss implications for optimal stabilization policy. Keywords: durables, services, demand recessions, pent-up demand, shift-share design, recov- ery dynamics, COVID-19. JEL codes: E32, E52 yEmail: [email protected] and [email protected]. We received helpful comments from George-Marios Angeletos, Gadi Barlevy, Florin Bilbiie, Ricardo Caballero, Lawrence Christiano, Martin Eichenbaum, Fran¸coisGourio, Basile Grassi, Erik Hurst, Greg Kaplan, Andrea Lanteri, Jennifer La'O, Alisdair McKay, Simon Mongey, Ernesto Pasten, Matt Rognlie, Alp Simsek, Ludwig Straub, Silvana Tenreyro, Nicholas Tra- chter, Gianluca Violante, Iv´anWerning, Johannes Wieland (our discussant), Tom Winberry, Nathan Zorzi and seminar participants at various venues, and we thank Isabel Di Tella for outstanding research assistance. -
CONSUMER CONFIDENCE and the ECONOMY by Jay Wortley, Senior Economist
STATE NOTES: Topics of Legislative Interest March/April 2001 CONSUMER CONFIDENCE AND THE ECONOMY by Jay Wortley, Senior Economist There are a number of key economic variables that are closely watched because they help identify the current state of the economy and provide some clues as to where the economy is headed. One of these indicators is the University of Michigan’s Index of Consumer Sentiment. This index is designed to measure the level of confidence consumers have in the economy. This article explains why this index is closely watched, describes how the index is created, and presents what the index is revealing about the current state of the economy. Why is Consumer Confidence Important? Consumer confidence is important because it is a key factor that helps determine how much consumers are going to spend on goods and services, which is one of the major driving forces in the economy. From 1980 to 2000, expenditures by consumers accounted for 67% of total economic activity. Due to the fact that consumer spending is a major source of overall economic activity, most of the time it is safe to say that as consumer spending goes, so goes the overall economy. For example, in 1991, personal consumption expenditures, adjusted for inflation, declined 0.2% and overall economic activity, as measured by real Gross Domestic Product (GDP) fell 0.5%, but in 2000, real consumer spending increased 5.3% and total economic activity grew 5.0%. Consumer confidence is a good indicator of consumer spending because the more confident consumers are about future economic conditions, the more likely they are to purchase consumer goods, particularly the relatively high- priced major purchases such as motor vehicles, houses, and household furnishings. -
AP Macroeconomics: Vocabulary 1. Aggregate Spending (GDP)
AP Macroeconomics: Vocabulary 1. Aggregate Spending (GDP): The sum of all spending from four sectors of the economy. GDP = C+I+G+Xn 2. Aggregate Income (AI) :The sum of all income earned by suppliers of resources in the economy. AI=GDP 3. Nominal GDP: the value of current production at the current prices 4. Real GDP: the value of current production, but using prices from a fixed point in time 5. Base year: the year that serves as a reference point for constructing a price index and comparing real values over time. 6. Price index: a measure of the average level of prices in a market basket for a given year, when compared to the prices in a reference (or base) year. 7. Market Basket: a collection of goods and services used to represent what is consumed in the economy 8. GDP price deflator: the price index that measures the average price level of the goods and services that make up GDP. 9. Real rate of interest: the percentage increase in purchasing power that a borrower pays a lender. 10. Expected (anticipated) inflation: the inflation expected in a future time period. This expected inflation is added to the real interest rate to compensate for lost purchasing power. 11. Nominal rate of interest: the percentage increase in money that the borrower pays the lender and is equal to the real rate plus the expected inflation. 12. Business cycle: the periodic rise and fall (in four phases) of economic activity 13. Expansion: a period where real GDP is growing. 14. Peak: the top of a business cycle where an expansion has ended. -
The-Great-Depression-Glossary.Pdf
The Great Depression | Glossary of Terms Glossary of Terms Balanced budget – Government revenues equal expenditures on an annual basis. (Lesson 5) Bank failure – When a bank’s liabilities (mainly deposits) exceed the value of its assets. (Lesson 3) Bank panic – When a bank run begins at one bank and spreads to others, causing people to lose confidence in banks. (Lesson 3) Bank reserves – The sum of cash that banks hold in their vaults and the deposits they maintain with Federal Reserve banks. (Lesson 3) Bank run – When many depositors rush to the bank to withdraw their money at the same time. (Lesson 3) Bank suspensions – Comprises all banks closed to the public, either temporarily or permanently, by supervisory authorities or by the banks’ boards of directors because of financial difficulties. Banks that close under a special holiday declaration and remained closed only during the designated holiday are not counted as suspensions. (Lesson 4) Banks – Businesses that accept deposits and make loans. (Lesson 2) Budget deficit – When government expenditures exceed revenues. (Lesson 4) Budget surplus – When government revenues exceed expenditures. (Lesson 4) Consumer confidence – The relationship between how consumers feel about the economy and their spending and saving decisions. (Lesson 5) Consumer Price Index (CPI) – A measure of the prices paid by urban consumers for a market basket of consumer goods and services. (Lesson 1) Deflation – A general downward movement of prices for goods and services in an economy. (Lessons 1, 3 and 6) Depression – A very severe recession; a period of severely declining economic activity spread across the economy (not limited to particular sectors or regions) normally visible in a decline in real GDP, real income, employment, industrial production, wholesale-retail credit and the loss of overall confidence in the economy. -
Consumption Growth Parallels Income Growth: Some New Evidence
This PDF is a selection from an out-of-print volume from the National Bureau of Economic Research Volume Title: National Saving and Economic Performance Volume Author/Editor: B. Douglas Bernheim and John B. Shoven, editors Volume Publisher: University of Chicago Press Volume ISBN: 0-226-04404-1 Volume URL: http://www.nber.org/books/bern91-2 Conference Date: January 6-7, 1989 Publication Date: January 1991 Chapter Title: Consumption Growth Parallels Income Growth: Some New Evidence Chapter Author: Christopher D. Carroll, Lawrence H. Summers Chapter URL: http://www.nber.org/chapters/c5995 Chapter pages in book: (p. 305 - 348) 10 Consumption Growth Parallels Income Growth: Some New Evidence Christopher D. Carroll and Lawrence H. Summers 10.1 Introduction The idea that consumers allocate their consumption over time so as to max- imize a stable individualistic utility function provides the basis for almost all modem work on the determinants of consumption and saving decisions. The celebrated life-cycle and permanent income hypotheses represent not so much alternative theories of consumption as alternative empirical strategies for fleshing out the same basic idea. While tests of particular implementations of these theories sometimes lead to statistical rejections, life-cycle/permanent income theories succeed in unifying a wide range of diverse phenomena. It is probably fair to accept Franc0 Modigliani’s ( 1980) characterization that “the Life Cycle Hypothesis has proved a very fruitful hypothesis, capable of inte- grating a large variety of facts concerning individual and aggregate saving behaviour.” This paper argues, however, that both permanent income and, to an only slightly lesser extent, life-cycle theories as they have come to be implemented in recent years are inconsistent with the grossest features of cross-country and cross-section data on consumption and income and income growth. -
Pergamon J\)Ll-:' 1:1-..C\JL'r Science Ltj
View metadata, citation and similar papers at core.ac.uk brought to you by CORE provided by Research Papers in Economics .lounw/ of lntcnwtiww/ Moucr and Finam 1'. Vol. 10. Nll. -L pp. 617 h5 1. Jlll>7 �Pergamon j\)ll-:' 1:1-..c\JL'r Science LtJ. All rt�hb ll''-L'I\l'J PII: PrintcU in Great H1 ita in S0261-5606(97)00007-7 02bl<;;6()6/ll7 S17 I)() 11.1)1) Dynamic analysis in the Viner model of mercantilism HENG-FU ZOU* Institute of Advanced Studies, Wuhan University, China and The World Bank, Washington, DC, USA This paper models the central theme of mercantilism in Jacob Viner's interpretation-power vs plenty-in a framework of modern theory of international finance. It is shown that, in the Viner model of mercantil ism, a nation with strong mercantilist sentiment ends up with large foreign asset accumulation and high consumption in the long run; an import tariff leads to more foreign asset holding and more total consump tion; furthermore, in the Viner model, the Harberger- Laursen-Metzler effect exists unambiguously: a permanent terms-of-trade deterioration causes a current account deficit in the short run. (JEL F1, F3, BO). © 1997 Elsevier Science Ltd. This paper offers a mathematical model of mercantilism according to the interpretation by Jacob Viner (1937, 1948, 1968, 1991) while including the interpretations of mercantilism by Schmoller (1897), Cunningham (1907, 1968), and Heckscher (1935, 1955) as special cases of the Viner model. Even though mercantilism has been examined, criticized, or even ridiculed since Adam Smith, only recently has a formal model of mercantilism been presented by Irwin (1991) in a framework of the strategic trade theory. -
Financial Stability Or Instability? Impact from Chinese Consumer 2
FINANCIAL STABILITY OR INSTABILITY? IMPACT FROM CHINESE CONSUMER 2. CONFIDENCE Shi-Qi LIU1 Xin-Zhou QI2 Meng QIN3 Chi-Wei SU4 Abstract This paper attempts to study the dynamic causal relationship between Chinese consumer confidence and financial stability by using a sub-sample time-varying rolling window test. Through empirical research, it is proved that consumer confidence improves the stability of the financial market, ensure the smooth operation of the financial system, and reduce the possibility of financial risks. Similarly, financial stability has a positive impact on consumers. Due to the government's intervention in the economy, the financial market is relatively stable, thus consumers are full of confidence in the market. Therefore, we find that the causal relationship between consumer confidence and financial stability is consistent with financial system volatility model, which contributes to the stability of financial markets and the reduction of financial crises. This finding helps monetary authorities maintain financial stability by increasing consumer confidence and making the most effective decisions based on economic trends. Keywords: consumer confidence; financial stability; bootstrap; rolling window; causality; time-varying JEL Classification: C32, D81, E32 1 Qingdao University, School of Economics, No. 308 Ningxia Rd., Qingdao, Shandong, China; E- mail: [email protected] 2 Corresponding Author. Qingdao University, School of Economics, No. 308 Ningxia Rd., Qingdao, Shandong, China; E-mail: [email protected] 3 Party School of the Central Committee of the Communist Party of China (National Academy of Governance), Graduate Academy, No. 100 Dayouzhuang, Beijing, China; E-mail: [email protected] 4 Corresponding Author. Qingdao University, School of Economics, No.