Psychology, consumer sentiment and household expenditures

Abstract

The aim of this article is to assess the role of the Italian Consumer Sentiment Index (CSI) as an autonomous driving force of consumption decisions. We test for the presence of ‘rule of thumb’ consumers as originally proposed by Campbell and Mankiw (1991 Campbell, JY and Mankiw, NG. 1991. The response of consumption to income. A cross-country investigation. European Economic Review, 35: 723–56. [Crossref], [Web of Science ®] , [Google Scholar]), using sentiment measures distinguished by respondent's working condition and consumption data disaggregated according to durability, over the period 1982–2004. The consumption-sentiment relationship is found to be stronger for some groups of households and for some particular categories of expenditures. Moreover, sentiment seems to be not well explained by economic fundamentals alone, capturing also the effects of the political cycle and exceptional circumstances.