Growth in US Durables Spending: Assessing the Impact of Consumer Ability and Willingness to Buy

Baghestani, Hamid; Fatima, Sehar

doi:10.1007/s41549-021-00053-7

Cited by 6 publications

(2 citation statements)

References 48 publications

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“…Other studies examine whether buying attitudes explain the behavior of economic indicators. For instance, Baghestani and Fatima (2021) show that consumer durable-buying attitudes (which influence consumer willingness to buy) help explain the behavior of growth in durables spending, and Baghestani (2017a) shows that consumer home-buying attitudes explain the behavior of home sales during both tranquil and uncertain periods.…”

Section: Related Literaturementioning

confidence: 99%

Do consumer survey data help improve US vehicle sales forecasts?

Baghestani

2021

JES

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PurposeThis study is concerned with evaluating the Federal Reserve forecasts of light motor vehicle sales. The goal is to assess accuracy gains from using consumer vehicle-buying attitudes and expectations about future business conditions derived from the long-running Michigan Surveys of Consumers.Design/methodology/approachSimplicity is a core principle in forecasting, and the literature provides plentiful evidence that combining forecasts from different methods and models reduces out-of-sample forecast errors if the methods and models are valid. As such, the authors construct a simple vector autoregressive (VAR) model that incorporates consumer vehicle-buying attitudes and expectations about future business conditions. Comparable forecasts of vehicle sales from this model are then combined with the Federal Reserve forecasts to assess accuracy gains.FindingsThe findings for 1994–2016 indicate that the Federal Reserve and VAR forecasts contain distinct and useful predictive information, and the combination of the two forecasts shows reductions in forecast errors that are more significant at longer horizons. The authors thus conclude that there are accuracy gains from using consumer survey responses.Originality/valueThis is the first study that is concerned with evaluating the Federal Reserve forecasts of vehicle sales and examines whether there are accuracy gains from using consumer vehicle-buying attitudes and expectations.

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Section: Related Literaturementioning

confidence: 99%

Do consumer survey data help improve US vehicle sales forecasts?

Baghestani

2021

JES

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“…These empirical results led economists to eventually reject the positive findings at the macro level as illusory. But given its predictive performance at the macro level, survey data on expectations became an indispensable component of systems of leading economic indicators now conducted by nearly every country in the world (Baghestani & Fatima, 2021 ; Campelo et al, 2020 ; Cesaroni & Iezzi, 2017 ; Curtin, 2007 ; Lahiri & Zhao, 2016 ).…”

Section: Introductionmentioning

confidence: 99%

A New Theory of Expectations

Curtin

2022

J Bus Cycle Res

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Expectations are essential for understanding the economic choices of individuals as well as cyclical developments in an economy over time. The initial theory of how people form their expectations was first introduced by Aristotle more than two millennia ago. The core elements he advanced were that forward-looking decisions must be based on expectations and those expectations must be formed by reason, free from the corrupting influence of passion. These guidelines have been formalized in theories of rational expectations. There has been no consensus among social scientists, however, about whether rationality should be defined by how expectations are formed (favored in psychology) or by the outcomes of the formation process (favored in economics). Data collected by the University of Michigan over the past half-century appear to support both views: the psychological thesis of bounded rationality in the formation of expectations by individuals as well as the unbounded rationality thesis of economics when applied to the expectations observed across the entire economy. The goal of this paper is to correct empirical misspecifications, and to incorporate recent advances in neuroscience, including the dominance of nonconscious processes over conscious deliberation, the critical role of affective evaluations, and the formation of expectations by a Bayesian updating procedure. The new theory highlights the importance of contextual factors, and provides a more accurate assessment of costs and benefits. Although these innovations represent a radical departure from orthodox theories, they are justified by the increase in explanatory power provided by this new theory of expectations.

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Ability to consume versus willingness to consume: the role of nonlinearities

Sorić

2022

Empirica

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Growth in US Durables Spending: Assessing the Impact of Consumer Ability and Willingness to Buy

Cited by 6 publications

References 48 publications

Do consumer survey data help improve US vehicle sales forecasts?

Do consumer survey data help improve US vehicle sales forecasts?

A New Theory of Expectations

Ability to consume versus willingness to consume: the role of nonlinearities

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