Martin Hodula, Simona Malovaná, Jan Frait
We construct a novel index of households’ macroeconomic conditions for 22 high-income European countries between 2002 Q1 and 2018 Q4. The resulting index is in line with the broad features of the countries’ business cycles and captures households’ economic well-being. We discuss the complementary character of the proposed index in relation to widely employed survey-based consumer confidence indicators. We show that households’ expectations are tightly linked to current macroeconomic conditions. This finding echoes the literature linking consumer attitudes and economic development. In a single-country case study, we provide empirical evidence that links the proposed index to new credit extended to households. The evidence suggests that households need a longer period of good macroeconomic conditions to decide to take on a mortgage than they do in the case of a consumer loan.
JEL codes: F12, F41, F43
Keywords: Composite index, factor analysis, households’ confidence, loan growth
Issued: December 2019
Download: CNB WP No. 10/2019 (pdf, 462 kB), H-MCI (xlsx, 103 kB), Estimation code and data (zip, 312 kB)