Consumer Confidence Index and Economic Growth: An Empirical Analysis of EU Countries

Abstract

Consumer Confidence Index (CCI) plays an important role through providing decision makers and economic forecasters with required information about present and future economic condition. These indices play a unique role in determining public policies as well as business decisions. Consumer confidence index defines the degree of optimism on the current state of the economy that consumers are expressing through their activities of saving and spending which lead to economic growth of the country. Positive changes in consumer confidence should lead to the economic growth while negative changes impede the economic growth of the countries. This study is an attempt to empirically evaluate the link between the CCI and economic growth of the selected European countries: United Kingdom, Germany, France, Denmark and Netherland. Panel co-integration procedures are applied to establish the long run relationship between the CCI and economic growth for the period of 1996 (1)-2012 (4). Empirical results show the existence of the long run relationship between consumer confidence and economic growth.

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