Consumer confidence and consumption forecast: a non-parametric approach
The consumer confidence index is a highly observed indicator among short-term analysts and news reporters and it is generally considered to convey some useful information about the short-term evolution of consumer expenditure. However, its usefulness in forecasting households' consumption is sometimes questioned in empirical studies. A possible weakness can be due to the use of a linear functional form to model the relation between these two variables. Here, in order to overcome this issue, a non-parametric model is used, so that overly restrictive assumptions about the functional form can be avoided.
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