Identifying the Interdependence between Consumer Confidence and Macroeconomic Developments in Croatia

Abstract

This article represents an empirical attempt to discern the interrelationship between consumer confidence and macroeconomic trends in Croatia. Previous studies that employ both subjective and objective variables show that consumer confidence, consumption and gross domestic product in other countries are interdependent to a great extent. Apart from the mentioned variables, our study additionally includes savings, as another important determinant in the households’ economic decision making. The results indicate that consumer confidence Granger-causes all selected macroeconomic variables and vice versa. Not surprisingly, there are also many significant interrelations between the macroeconomic variables. These findings confirm the predictive ability of consumer confidence in Croatia and suggest that combining subjective and objective indicators has an important role in understanding households’ economic behaviour.

Keywords

• consumer confidence
• consumption
• savings
• GDP
• Granger causality