Economic conditions and confidence: Do changes in the consumption level affect the dynamics of confidence ?
Résumé
People are consumers and voters. Their sentiment about the economy and the competence of their leaders determine their confidence level. This research note investigates whether economic conditions measured by changes in the recent consumption level modify the dynamics of confidence formation. Using French monthly economic and political data (from May 1988 to April 2010), we test this assumption with a threshold vector autoregression model. We show that changes in consumption do not alter the strength or direction of causality between consumer sentiment and political confidence. There is no evident effect of the state of the economy on confidence dynamics. It does not require special treatments by forecasters everything else equal.