Consumer confidence, endogenous growth and endogenous cycles

Detalhes bibliográficos
Autor(a) principal: Gomes, O.
Data de Publicação: 2010
Tipo de documento: Artigo
Idioma: eng
Título da fonte: Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
Texto Completo: https://ciencia.iscte-iul.pt/public/pub/id/22721
http://hdl.handle.net/10071/10086
Resumo: Purpose: The purpose of this paper is to develop growth models that depart from the conventional framework, in the sense that consumption decisions take into account previous periods' expectations about output fluctuations. Households will raise their propensity to consume in periods of expected expansion and they will lower it in phases of predictable recession. Such a framework allows discussion of how growth trends may be disturbed over time as the result of changes in consumer sentiment. Design/methodology/approach: Endogenous growth models are generally designed to address long-term trends of growth. They explain how the economy converges with or diverges from a balanced growth path and they characterize aggregate behavior, given the optimization problem faced by a representative agent that maximizes consumption utility. In such frameworks, only potential output matters and all decisions, by firms and households, are taken on the assumption that any expectations on the value of the output gap do not interfere with the agents' behavior. Introducing consumer sentiment, a conventional growth model is modified in order to understand how effective output eventually deviates from the balanced growth path. Findings: The proposed framework allows one to introduce nonlinear dynamics into the model, making it feasible to obtain, for reasonable parameter values, endogenous fluctuations. These are triggered by a Neimark-Sacker bifurcation. Originality/value: By introducing consumer confidence or consumer sentiment, it is possible to integrate the evaluation of growth and cycles into a unified framework. It is possible to explain business cycles as the result of the consumers' reaction to the expected performance of the economic system.
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spelling Consumer confidence, endogenous growth and endogenous cyclesBusiness developmentConsumer behaviourConsumptionPurpose: The purpose of this paper is to develop growth models that depart from the conventional framework, in the sense that consumption decisions take into account previous periods' expectations about output fluctuations. Households will raise their propensity to consume in periods of expected expansion and they will lower it in phases of predictable recession. Such a framework allows discussion of how growth trends may be disturbed over time as the result of changes in consumer sentiment. Design/methodology/approach: Endogenous growth models are generally designed to address long-term trends of growth. They explain how the economy converges with or diverges from a balanced growth path and they characterize aggregate behavior, given the optimization problem faced by a representative agent that maximizes consumption utility. In such frameworks, only potential output matters and all decisions, by firms and households, are taken on the assumption that any expectations on the value of the output gap do not interfere with the agents' behavior. Introducing consumer sentiment, a conventional growth model is modified in order to understand how effective output eventually deviates from the balanced growth path. Findings: The proposed framework allows one to introduce nonlinear dynamics into the model, making it feasible to obtain, for reasonable parameter values, endogenous fluctuations. These are triggered by a Neimark-Sacker bifurcation. Originality/value: By introducing consumer confidence or consumer sentiment, it is possible to integrate the evaluation of growth and cycles into a unified framework. It is possible to explain business cycles as the result of the consumers' reaction to the expected performance of the economic system.Emerald Group Publishing Ltd.2015-11-03T18:01:14Z2010-01-01T00:00:00Z20102015-11-03T17:59:40Zinfo:eu-repo/semantics/publishedVersioninfo:eu-repo/semantics/articleapplication/pdfhttps://ciencia.iscte-iul.pt/public/pub/id/22721http://hdl.handle.net/10071/10086eng0144-3585Gomes, O.info:eu-repo/semantics/openAccessreponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)instname:Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãoinstacron:RCAAP2023-11-09T17:52:02Zoai:repositorio.iscte-iul.pt:10071/10086Portal AgregadorONGhttps://www.rcaap.pt/oai/openaireopendoar:71602024-03-19T22:25:53.812133Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) - Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãofalse
dc.title.none.fl_str_mv Consumer confidence, endogenous growth and endogenous cycles
title Consumer confidence, endogenous growth and endogenous cycles
spellingShingle Consumer confidence, endogenous growth and endogenous cycles
Gomes, O.
Business development
Consumer behaviour
Consumption
title_short Consumer confidence, endogenous growth and endogenous cycles
title_full Consumer confidence, endogenous growth and endogenous cycles
title_fullStr Consumer confidence, endogenous growth and endogenous cycles
title_full_unstemmed Consumer confidence, endogenous growth and endogenous cycles
title_sort Consumer confidence, endogenous growth and endogenous cycles
author Gomes, O.
author_facet Gomes, O.
author_role author
dc.contributor.author.fl_str_mv Gomes, O.
dc.subject.por.fl_str_mv Business development
Consumer behaviour
Consumption
topic Business development
Consumer behaviour
Consumption
description Purpose: The purpose of this paper is to develop growth models that depart from the conventional framework, in the sense that consumption decisions take into account previous periods' expectations about output fluctuations. Households will raise their propensity to consume in periods of expected expansion and they will lower it in phases of predictable recession. Such a framework allows discussion of how growth trends may be disturbed over time as the result of changes in consumer sentiment. Design/methodology/approach: Endogenous growth models are generally designed to address long-term trends of growth. They explain how the economy converges with or diverges from a balanced growth path and they characterize aggregate behavior, given the optimization problem faced by a representative agent that maximizes consumption utility. In such frameworks, only potential output matters and all decisions, by firms and households, are taken on the assumption that any expectations on the value of the output gap do not interfere with the agents' behavior. Introducing consumer sentiment, a conventional growth model is modified in order to understand how effective output eventually deviates from the balanced growth path. Findings: The proposed framework allows one to introduce nonlinear dynamics into the model, making it feasible to obtain, for reasonable parameter values, endogenous fluctuations. These are triggered by a Neimark-Sacker bifurcation. Originality/value: By introducing consumer confidence or consumer sentiment, it is possible to integrate the evaluation of growth and cycles into a unified framework. It is possible to explain business cycles as the result of the consumers' reaction to the expected performance of the economic system.
publishDate 2010
dc.date.none.fl_str_mv 2010-01-01T00:00:00Z
2010
2015-11-03T18:01:14Z
2015-11-03T17:59:40Z
dc.type.status.fl_str_mv info:eu-repo/semantics/publishedVersion
dc.type.driver.fl_str_mv info:eu-repo/semantics/article
format article
status_str publishedVersion
dc.identifier.uri.fl_str_mv https://ciencia.iscte-iul.pt/public/pub/id/22721
http://hdl.handle.net/10071/10086
url https://ciencia.iscte-iul.pt/public/pub/id/22721
http://hdl.handle.net/10071/10086
dc.language.iso.fl_str_mv eng
language eng
dc.relation.none.fl_str_mv 0144-3585
dc.rights.driver.fl_str_mv info:eu-repo/semantics/openAccess
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dc.publisher.none.fl_str_mv Emerald Group Publishing Ltd.
publisher.none.fl_str_mv Emerald Group Publishing Ltd.
dc.source.none.fl_str_mv reponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
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