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Consumers Confidence and Households Consumption in Brazil: Evidence from the FGV Survey

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The deterioration of Consumer Confidence has been considered an important driver of the recent financial crisis. However, empirical evidence on the relationship between confidence and household consumption is often inconclusive; in many cases, available analysis does not seem to confirm that confidence is able to predict expenditures once the role of economic fundamentals has been accounted for. Nevertheless, generally speaking, most of the literature refers to the most advanced economies of Europe and the USA, while evidence for emerging economies remains scarce. The main aim of this paper is to fill this gap for Brazil, looking at Consumer Survey data published by the Fundação Getulio Vargas since 2005, and studying its relationship with Brazilian consumption expenditures. According to the results, the overall Consumer Confidence Index and the Present Situation Index are good predictors of consumption, helping to improve the goodness of fit of consumer spending forecasting models. We also show that in Brazil a positive shock to confidence has a positive and significant impact on consumption for at least three quarters, a finding similar to those for more industrialized countries.
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Vol.:(0123456789)
Journal of Business Cycle Research (2020) 16:19–34
https://doi.org/10.1007/s41549-020-00042-2
1 3
RESEARCH PAPER
Consumers Condence andHouseholds Consumption
inBrazil: Evidence fromtheFGV Survey
AloisioCampeloJr.1· VivianeSedaBittencourt1· MarcoMalgarini2
Received: 29 August 2017 / Accepted: 5 March 2020 / Published online: 14 March 2020
© Springer Nature Switzerland AG 2020
Abstract
The deterioration of Consumer Confidence has been considered an important
driver of the recent financial crisis. However, empirical evidence on the relation‑
ship between confidence and household consumption is often inconclusive; in many
cases, available analysis does not seem to confirm that confidence is able to pre‑
dict expenditures once the role of economic fundamentals has been accounted for.
Nevertheless, generally speaking, most of the literature refers to the most advanced
economies of Europe and the USA, while evidence for emerging economies remains
scarce. The main aim of this paper is to fill this gap for Brazil, looking at Consumer
Survey data published by the Fundação Getulio Vargas since 2005, and studying its
relationship with Brazilian consumption expenditures. According to the results, the
overall Consumer Confidence Index and the Present Situation Index are good pre‑
dictors of consumption, helping to improve the goodness of fit of consumer spend‑
ing forecasting models. We also show that in Brazil a positive shock to confidence
has a positive and significant impact on consumption for at least three quarters, a
finding similar to those for more industrialized countries.
Keywords Consumer confidence· Household consumption expenditures· Survey
data· Brazil· VAR models
JEL Classication D12· C32· E17· D8
* Marco Malgarini
malgmarco@gmail.com
1 Fundaçao Getulio Vargas, Instituto Brasileiro de Economia, Rua Barão de Itambi, 60 ‑
Botafogo, RiodeJaneiroCEP22231‑000, Brazil
2 Italian National Agency fortheEvaluation ofUniversities andResearch Institutes (ANVUR),
Via Ippolito Nievo 35, 00153Rome, Italy
Content courtesy of Springer Nature, terms of use apply. Rights reserved.
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