Explaining Consumer Confidence in Portugal

Confidence in general and consumer confidence in particular are subject to increasing interest by many agents, including central banks and governments at the national level, and supranational entities, such as the European Commission of the European Union. Although the academic community shares this interest, the extant literature focuses on the use of consumer confidence to predict variables that describe aspects of the business cycle, such as consumption. Unlike this body of work, the objective of our paper is to analyse the evolution of consumer confidence in Portugal and examine the factors that underpin its formation. Using monthly and quarterly data over the period January 1987 to December 2009, we find that consumer confidence in Portugal is essentially explained by the economic performance, the entrance in the Euro zone and electoral circumstances.