CONSUMPTION,SENTIMENT, AND ECONOMIC NEWS

This paper investigates the influence of economic news on consumer sentiment, and examines whether “news shocks”—changes in coverage that would not be expected from incoming data on economic fundamentals—have aggregate effects. Using monthly U.S. data and a structural vector autoregression, I find that (1) sentiment is affected by news shocks; (2) after filtering out effects of news shocks, shocks to sentiment still have positive effects on consumer spending; and (3) news shocks influence both spending and unemployment in significant, though transitory ways. These results are consistent with other evidence of a role of nonfundamental factors in aggregate fluctuations. (JEL E21, E32, D12)     

Climbing out of an economic crisis: A cycle of consumer sentiment and personal stress

This research examines bidirectional relationships between consumer sentiment and personal stress. It seeks to answer the question whether reduced consumer sentiment (consumer perceptions about the global, national and personal economic situation) raises personal stress levels, and whether increased personal stress levels depresses consumer sentiment. Finding such relationships would reveal a pathway from economic to personal well-being, as reflected in personal stress, and the other way around. A large longitudinal study in the Netherlands with a total of eight waves across three years (2012–2014), 4 waves during and 4 waves after the recent worldwide economic crisis, finds on average low personal stress levels among consumers, which is reassuring. Also and as expected, consumers are more positive about the state of the economy after than during the crisis. Importantly, more positive consumer sentiment indeed contributes to lower levels of personal stress. Moreover, the more personal stress consumers experience, the more pessimistic they are about the state of the economy after the crisis, whereas this connection is weaker during the crisis. This sheds new light on the pathways between consumer sentiment about the economy and their personal well-being.     

WHAT MAKES A GOOD ECONOMY? EVIDENCE FROM PUBLIC OPINION SURVEYS

Analysis of 35 years of previously unstudied survey data shows how the American public evaluates the health of the macroeconomy. Survey responses are multidimensional, distinct from indexes of “consumer sentiment,” and based mostly on genuine perceptions of economic conditions, not media reports of economic statistics. As such, they contain unique information about current and future values of these statistics, particularly consumption growth, a longstanding focus of the literature. Both “intangibles” and macroeconomic fundamentals explain substantial variation in the survey data; the public equates 2 to 5 percentage points of inflation with 1 percentage point of unemployment. (JEL E32, E27, E01)     

The role of consumer and business sentiment in forecasting telecommunications traffic

The objective of this study is to investigate the relevance of consumer and business sentiment surveys in forecasting international telecommunications traffic. The components of telecommunications data used in the study relate to total telephone traffic outgoing from Australia and its social and business telephone sub-categories. Three sentiment surveys are considered: one consumer survey conducted by the University of Melbourne, and two business surveys, each conducted by a business association and major bank. The above data series are available on a quarterly basis from the first quarter of 1973. The approach employed consists of the application of transfer function modelling techniques to the traffic and various indexes measuring consumer and business sentiment. A major finding of this study is that sentiment series are correlated with international telephone traffic, and that in all but one case, the relationship can be modelled by some form of transfer function. The forecasts of the estimated models satisfactorily incorporate directional swings in the traffic.     

A note on the measurement,quantification, and use of consumer confidence

It is argued that consumer spending on durable items is not necessarily the only type of consumer spending to be influenced by consumer confidence but. given a certain degree of affluence. spending on non-durables can also be influenced by it.Different methods of quantification of consumer confidence are touched upon and the issue of equal weighting versus differential weighting, where weights are ascertained by the use of factor analysis, is discussed in more detail. Various indices of consumer confidence are computed and tested by means of regression analyses. It was found that it is immaterial whether a composite measure of confidence is based on factor analysis or simply on the summing and averaging of responses.The results of the regression analyses suggest that the hypothesis that consumer sentiment partly determines movements in private consumption expenditure holds true, especially in the case of durables. There are indications, however, that spending on non-durable goods might also be influenced by consumer sentiment.     

A behavioral model of the demand for consumer durables

It is argued that models of the demand for consumer durables would be strengthened by the introduction of a behavioral element reflecting the nature of the decision making process within the individual household. A possible behavioural model is described. It is suggested that this would consist of the following elements: general economic confidence of the consumer (derived from personal expectations and attitudes to the general economic situation): general durable purchasing orientation (including willingness to devote resources to durable purchasesand house moving expectations); specific product choice considerations (including orders of acquisition of new durables: the implicit depreciation of existing equipment; perceptions of the characteristics of new products; purchase expectations). Such a model is more extensive than that normally described by others working in this field. The interaction between the different variables is discussed. It is shown that all these elements can be estimated through regular surveys and so the model can be made operational for forecasting purposes. However, it needs to be recognised that there are also unexpected even as which will affect the outcome in individual circumstances and the nature of these is also considered.     

Exit, Voice, Loyalty in Transition: A Theoretical Framework

On the grounds of borrowing and reforming Hirschman’s terminology, ‘exit, voice, loyalty’, we show both a conceptual and a methodological framework that can be used to raise questions in transitology studies. These issues include the following points: are there any models being developed concerning the transition countries?; are there any similar models in Western Europe?; is there any convergence between the models of both Eastern and Western Europe? If the answer to the last issue is yes, then in which areas? Or if it is a no, is it true that a special economic, social and also political system is developing in Eastern Europe? Another issue concerns how strong the growth potential of the different models is. It also examines which are the successful models and which are not, and what is the role of the economic and political elite in the development of these models. This study includes only the theoretical framework.     

Lay people’s models of the economy: A study based on surveys of consumer sentiments

The purpose of this paper is to use a large data set comprising individual’s responses to survey questions about future economic conditions, unemployment and prices to explore lay people’s models of the economy and specifically their understanding of the relationship between unemployment and economic activity and also between unemployment and prices. The data is taken from the questionnaires used to form monthly indexes of consumer sentiments in Australia. We ask if the implied bivariate relationships are rational in the sense used by Muth (1961) and if they are consistent with the good-begets-good heuristic proposed by Leiser and Aroch (2009). We also ask if they are consistent with the actual operation of economic – and especially monetary – policy in Australia. We find that the data does provide some support for these hypotheses and for recent work in behavioural macroeconomics utilising the good-begets-good heuristic.     

The consistency of choice using experimental design

Conjoint designs provide an appealing context for investigating the consistency of consumer choice. This short article demonstrates that in principle experimental designs can be an effective mechanism for studying the consistency of consumer choice, provided one includes some pairs of attribute combinations which are dominant, such that one is worse or better off on every dimension. Using a preference design from a study on attendance at an international exposition in Australia we identify dominance in a subset of all possible pairs, and use this in two test of choice consistency to identify the extent of illogicality in choice. Discrete choice analysis is used to see if inconsistency is linked to population subgroups. The evidence can be used to point to subgroups who may have difficulty in comprehending controlled experimental instruments, and/or are not rational in the sense defined by our models of behaviour, and who may require special consideration in prediction of choice.     

Out of the shadows: Classifying economies by the extent and nature of employment in the informal economy

Given the prevalence of informality, this article proposes a typology for classifying countries by the extent and nature of employment in the informal economy, rather than by the composition of their formal economies. The author analyses ILO data on employment in the informal economy in 36 developing countries, and shows that there is a significant correlation between cross‐national variations in the degree and intensity of informalization and cross‐national variations in social and economic indicators such as levels of GNP per capita, corruption, poverty, taxation and social contributions. The article concludes by discussing implications for theory and policy.     

INDETERMINACY AND VOLATILITY OF EXCHANGE RATES UNDER IMPERFECT CURRENCY SUBSTITUTION

We know that when currencies are perfect substitutes, exchange rates could become indeterminate. We show that even when currencies are less than perfect substitutes exchange rates could display volatility unrelated to economic fundamentals. With increases in currency substitution: (1) the exchange rate becomes more sensitive to changes in economic fundamentals, increasing its volatility; (2) the exchange rate could become indeterminate, and it is more likely to become so if governments pursue similar monetary policies; (3) currencies with high nominal interest rates would decline significantly and the exchange rate becomes more sensitive to changes in the supply of those currencies.     

The roles of inflation and consumer sentiment in explaining Australian consumption and savings patterns

Qualitative and quantitative measures of inflation, unemployment and consumer sentiment are incorporated into traditional models of the allocation of consumers' income. Quarterly survey data collected by the Melbourne Institute of Applied Economic and Social Research are used. Both current and expected levels of variables are considered.Equations are estimated for expenditure on motor vehicles, household durabls and non-durable goods as well as for household saving. The non-traditional variables are found to be significant, although the traditional price and income variables still dominate. In several cases qualitative variables prove to be superior to their quantitative counterparts.     

THE EMPIRICAL RELIABILITY OF MONETARY AGGREGATES AS INDICATORS: 1983–1987

It is widely believed that monetary aggregates have failed to predict economic performance over 1983-87. This paper observes that the traditional definition of money (M1 lessother checkable deposits, or M1A) shows no evidence of structural change, and yields lower prediction errors for both real GNP and inflation over 1983-87Q2 than the errors obtained using M1 or M2. If there is a mystery, it is not why MIA has done so well, but why economists abandoned it for M1 or what was once called M1B (currency, demand deposits, and other checkable deposits).     

Are income poverty and perceptions of financial difficulties dynamically interrelated?

An individual’s economic ill fare can be assessed both objectively, looking at one’s income with reference to a poverty line, or subjectively, on the basis of the individual’s perceived experience of financial difficulties. Although these are distinct perspectives, income poverty and perceptions of financial difficulties are likely to be interrelated. Low income (especially if it persists) is likely to negatively affect perceptions of financial difficulties and, as recently suggested by the behavioural economics literature, (past) subjective sentiment may in return influence individual’s income generating ability and poverty status. The aim of this paper is to determine the extent of these dynamic cross-effects between both processes. Using Luxembourg survey data, our main result highlights the existence of a feedback effect from past perceived financial difficulties on current income poverty suggesting that subjective perceptions can have objective effects on an individual’s behaviour and outcomes.     

“Starting Points Matter”: Humanizing Economics Pedagogy through New Economic Paradigms

Abstract

This paper considers the implications of the neoclassical dominant narrative in economics education and conceptualizes specific responses that teachers and teacher educators can take to promote a humanizing economics pedagogy. I briefly describe alternative economic paradigms and contrast them with neoclassical fundamentals. Then, I include economic lesson ideas to showcase ways to teach traditional economic content in ways that attend to neoclassicism but expand the potential of the discipline into new paradigms. By interrogating the fundamentals of neoclassical economics, students and teachers of economics can use these new economic paradigms to foster a counternarrative that is more critical and humanizing and can help address the prevailing themes of an era marked by systemic oppression.     

The empirical assessment of multidimensional welfare,inequality and poverty: Sample weighted multivariate generalizations of the Kolmogorov–Smirnov two sample tests for stochastic dominance

Sample weighted multidimensional extensions to existing stochastic dominance, inequality and polarization comparison techniques are introduced and employed to examine whether or not ignoring multidimensional and sample weighting aspects result in misleading inferences. The techniques are employed in the context of a sample of nations, in essence each country in the sample is represented by an agent characterized by the per capita GNP of that country, the GNP growth rate of that country and the average life expectancy in that country. In essence the inequality that is being examined is that between the representative agents in these countries, intra country inequality is not being measured. The results suggest that multidimensional techniques lead to substantially different conclusions from those drawn from the use of unidimensional measures and that sample weighting also has a profound effect on the empirical outcomes. An erratum to this article can be found at     

The nature of preferences: An exploration of the relationship between economics and psychology

Ordinal utility theory begins with the assumption of a consumer of given preferences, therefore, we must go beyond economic theory in order to investigate the nature of preferences without becoming circular. The approach here is to use interpersonal theories of personality development to investigate the formation of the preferences of the individual consumer. To establish a methodological relationship between economics and psychology, a common ground of analysis and an integrative framework must be provided to bring the contributions of psychology into economics into a systematic way. This is explored by using specific psychoanalytic theories of the internalization of interpersonal relations, and by relating this to a more general theory of personality development based on the significance of interpersonal relations. The objective of this study is a broader understanding of the behavioral foundations of the economic theory of the consumer, and a greater appreciation for preference structures which do not conform to the concept of the rational consumer of economic theory.     

Environmental Concern of Labor Union Members in the United States

The labor and environmental movements have had a complicated relationship with periods of cooperation as well as conflict, but recently there has been increasing collaboration at the national level. Whether such a trend of cooperation can be sustained will partially depend on grassroots‐level connections between the two movements. However, there has been little empirical research on the environmental attitudes of union members, which is important for understanding the potential for shared values between union members and environmental activists. This article analyzes 1993, 2000, and 2010 General Social Survey data to examine if the environmental attitudes of people in union households have changed given shifting labor–environment relations and broader political‐economic conditions. We find that union membership does not influence environmental concern in weaker economic times (1993 and 2010) but that it has a positive effect on environmental concern in stronger economic times (2000). Thus, union households are generally no less concerned about the environment than nonunion households. Therefore, strengthening connections between union members and environmental activists may be a feasible strategy for invigorating both the labor and environmental movements.     

Monetary Fundamentals and Exchange Rate Dynamics under Different Nominal Regimes

We investigate the dynamic relationship between the U.S. dollar exchange rate and its fundamentals across different exchange rate regimes using data from the late 1800s or early 1900s for six countries. For these countries there is evidence of a long-run relation between the exchange rate and monetary fundamentals consistent with conventional exchange rate theories. Employing a multivariate regime-switching framework, we find that the relative importance of exchange rates and fundamentals in restoring the long-run equilibrium implied by the exchange rate–monetary fundamentals model varies significantly over time and is affected by the exchange rate regime in operation. (JEL F31 )     

Measuring a product's usefulness

This paper explains how a product's usefulness may be defined and measured. Many aspects of consumer product assessments are conducted sub-consciously and this process is closely examined. A product's usefulness can be evaluated by measuring its advantages over alternative solutions based on specific criteria associated with fundamentals needs. When multiple criteria are involved, different weights are assigned to each. It should take into account the context in which the product is used. For the purpose of this paper, we use a formula to determine the relative usefulness of a variety of products in different contexts. We conclude that aspects of product's usefulness, connected with sub-conscious human decision making processes, can be a major factor in predicting acceptance and rejection rates.