Consumer Confidence and Household Saving Behaviors: A Cross-Country Empirical Analysis

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The global financial crisis wreaked havoc on the European economy and dented consumer confidence. This paper exploits a panel dataset of 18 EU countries over the period 2001–2014 to examine whether this decrease in consumer confidence affected household saving behaviors and if so, which specific sub-indicators of consumer sentiment played the most significant role. To tackle the issue of potential endogeneity between household saving rates and consumer confidence, we use an instrumental variable approach. Our results suggest that confidence in household financial situations has a substantially larger effect on household saving than confidence in the general economic situation. Moreover, we find that the impact of consumer confidence on household saving has increased after the crisis, potentially due to a threshold effect.

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Fig. 1

Source: European Commission (2017)


  1. 1.

    For example, the European Central Bank (ECB) missed its policy target, a headline rate of inflation at close to but below two percent—for over 5 years (ECB European Central Bank 2011).

  2. 2.

    Peter Praet, chief economist and member of the Executive Board of the ECB, said as much in a recent interview with La Repubblica: “Yes, all central banks can do it. You can issue currency and you distribute it to people. That’s helicopter money. Helicopter money is giving to the people part of the net present value of your future seigniorage, the profit you make on the future banknotes.” (Praet 2016)

  3. 3.

    Only Malta reduced its ratio of public debt-to-GDP, from 62.3% in 2007 to 60.3% in 2015.

  4. 4.

    The presence of hysteresis was originally discussed in the context of labor markets (Blanchard and Summers 1986).

  5. 5.

    For a detailed explanation on how this indicator is calculated, see

  6. 6.

    The results of the survey used to construct the indicators have been discussed to explain evolutions in households’ spending decisions (e.g., ECB 2011), but these confidence indicators have not yet been introduced in a cross-country analysis of household saving behaviors.

  7. 7.

    However, there might also be a substitution effect. Falling interest rates decrease the reward for saving, making it more attractive to spend.

  8. 8.

    This argument was first advanced by Keynes (1936), who argued that economic fluctuations are largely driven by “animal spirits.” In other words, low confidence makes consumers spend less and save more, and makes firms reluctant to invest and hire. The resulting decline in incomes further undermines consumer and producer confidence.

  9. 9.

    In addition to being proxies for uncertainty, consumer confidence indicators could also reflect expected income growth (Dominitz and Manski 2004), unemployment, inflation (Barsky and Sims 2012) and non-economic factors (e.g. political tension or war) that influence households’ willingness to save (Acemoglu and Scott 1994).

  10. 10.

    As expansionary fiscal policy improves consumer and business confidence (e.g., Konstantinou and Tagkalakis 2011), an example of such an EU-wide policy would be a concerted fiscal stimulus in response to an economic downturn, similar to what was presented at the 2009 G20 summit, in which global leaders agreed to inject $1.1 trillion into the world economy.

  11. 11.

    Due to data limitations, an analysis of all EU countries was not feasible. The countries retained in our analysis are: Austria, Belgium, Bulgaria, Cyprus, Czech Republic, Denmark, Finland, France, Germany, Hungary, Ireland, Italy, Netherlands, Portugal, Slovakia, Slovenia, Spain, and the United Kingdom.

  12. 12.

    These five candidate countries are Albania, Montenegro, North Macedonia, Turkey, and Serbia.

  13. 13.

    The specific data source for each variable is mentioned in footnotes when discussing the variable.

  14. 14.

    Measured as savings without deducting consumption of fixed capital.

  15. 15.

    Data from AMECO.

  16. 16.

    Households dissave when spending exceeds income.

  17. 17.

    For further methodological guidance, see DG ECFIN (2016).

  18. 18.

    Data from Eurostat.

  19. 19.

    Data from Eurostat.

  20. 20.

    Data from Eurostat.

  21. 21.

    Data from Eurostat.

  22. 22.

    Data from Eurostat.

  23. 23.

    Data from Eurostat.

  24. 24.

    Data from Eurostat.

  25. 25.

    In a standard Keynesian framework, consumption and saving mainly depend on current income. However, Ando and Modigliani (1963), and Friedman (1957) argue that consumption and saving decisions are not only driven by current income, but also by the income individuals expect to receive in the future.

  26. 26.

    Both data from AMECO.

  27. 27.

    Data from Eurostat.

  28. 28.

    Data from Eurostat.

  29. 29.

    Data from Eurostat.

  30. 30.

    Data from Eurostat.

  31. 31.

    Data from the World Bank.

  32. 32.

    Data from the World Bank.

  33. 33.

    Data from AMECO.

  34. 34.

    This mechanism is not confined to postponing purchasing durable consumer goods. When households have low confidence in the evolution of their personal financial situation, they will be less inclined to spend a significant amount of their disposable income on vacations, as this is considered a luxury expense that can easily be forgone for a while.


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We thank Mattia Osvaldo Picarelli, Sofia Amaral-Garcia as well as the participants of the 87th International Atlantic Economic Conference in Athens for their very useful comments and insights on this paper. Moreover, we greatly appreciate the valuable contribution from Tom De Blauwe to the collection of data for our analysis.

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Correspondence to Willem Vanlaer.

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Appendix: Joint Harmonised EU Consumer Survey Questions Concerning Consumer Confidence

Appendix: Joint Harmonised EU Consumer Survey Questions Concerning Consumer Confidence

Q1 How has the financial situation of your household changed over the last 12 months? It has…

  • + + got a lot better

  • + got a little better

  • = stayed the same

  • − got a little worse

  • − − got a lot worse

  • N don’t know.

Q2 How do you expect the financial position of your household to change over the next 12 months? It will…

  • + + get a lot better

  • + get a little better

  • = stay the same

  • − get a little worse

  • − − get a lot worse

  • N don’t know.

Q3 How do you think the general economic situation in your country has changed over the past 12 months? It has…

  • + + got a lot better

  • + got a little better

  • = stayed the same

  • − got a little worse

  • − − got a lot worse

  • N don’t know.

Q4 How do you expect the general economic situation in this country to develop over the next 12 months? It will…

  • + + get a lot better

  • + get a little better

  • = stay the same

  • − get a little worse

  • − − get a lot worse

  • N don’t know.

Q5 How do you think that consumer prices have developed over the last 12 months?

They have…

  • + + risen a lot

  • + risen moderately

  • = risen slightly

  • − stayed about the same

  • -- fallen

  • N don’t know

Q6 By comparison with the past 12 months, how do you expect that consumer prices will develop in the next 12 months? They will…

  • + + increase more rapidly

  • + increase at the same rate

  • = increase at a slower rate

  • − stay about the same

  • − − fall

  • N don’t know

Q7 How do you expect the number of people unemployed in this country to change over the next 12 months? The number will…

  • + + increase sharply

  • + increase slightly

  • = remain the same

  • − fall slightly

  • − − fall sharply

  • N don’t know.

Q8 In view of the general economic situation, do you think that now is the right moment for people to make major purchases such as furniture, electrical/electronic devices, etc.?

  • ++ yes, it is the right moment now

  • = it is neither the right moment nor the wrong moment

  • − no, it is not the right moment now

  • N don’t know.

Q9 Compared to the past 12 months, do you expect to spend more or less money on major purchases (furniture, electrical/electronic devices, etc.) over the next 12 months? I will spend

  • ++ much more

  • + a little more

  • = about the same

  • − a little less

  • − − much less

  • N don’t know.

Q10 In view of the general economic situation, do you think that now is…?

  • ++ a very good moment to save

  • + a fairly good moment to save

  • − not a good moment to save

  • − − a very bad moment to save

  • N don’t know.

Q11 Over the next 12 months, how likely is it that you save any money?

  • + + very likely

  • + fairly likely

  • − not likely

  • − − not at all likely

  • N don’t know.

Q12 Which of these statements best describes the current financial situation of your household?

  • + + we are saving a lot

  • + we are saving a little

  • = we are just managing to make ends meet on our income

  • − we are having to draw on our savings

  • − − we are running into debt

  • N don’t know.

COF = (Q2 + Q4 + Q7 + Q11)/4

See Fig. 2 and Tables 11, 12, 13.

Fig. 2

Source: European Commission (2017)

Evolution of the household saving rate, 2001–2014.

Table 11 Correlation matrix of confidence indicators
Table 12 First-stage results
Table 13 First-stage results

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Vanlaer, W., Bielen, S. & Marneffe, W. Consumer Confidence and Household Saving Behaviors: A Cross-Country Empirical Analysis. Soc Indic Res 147, 677–721 (2020).

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  • Precautionary saving
  • Consumer confidence
  • Household saving behaviors