CEF.UP – ECO/FIN Seminar

Tuesday – May 13^th 2025, at 13:00h | Room 305

“Economic Policy Uncertainty and Consumer Perceptions: The Danish Case”

Michael Bergman –  University of Copenhagen (Denmark)

Abstract:
“This paper develops a newspaper based measure of economic policy uncertainty for Denmark using the method suggested by Baker et.al. (2016). We apply this measure to study the interrelationships between uncertainty, consumer confidence and a composite leading indicator. We find that uncertainty significantly affects household expectations about their own financial situation 12 months ahead, households become more pessimistic when uncertainty increases. The leading indicator is negatively related to uncertainty but exert less influence on consumer confidence than on uncertainty. EU economic policy uncertainty also significantly affects household expectations. Using disaggregated data on consumer confidence we find that males are on average more optimistic about the future developments of the economy and their own financial situation than females but they respond stronger to changes in uncertainty. Unemployed tend to be more optimistic than workers (a large share of the unemployed are young and young people tend to be more optimistic than older generations) but respond to uncertainty negatively. Middle income households and less skilled workers respond significantly to increases in uncertainty.”