Modeling the relationship between the Misery Index and Consumer Confidence in Mexico using an ARDL approach

Resumen

Confidence is a key element of any economy, as it determines variables such as consumption and investment. In particular, consumer confidence has proven useful in analyzing and forecasting private consumption. Therefore, this study explores the relationship between the consumer confidence indicator and Okun’s Misery Index in Mexico using an autoregressive distributed lag model, which also considers the real GDP and the bilateral real exchange rate of Mexico with the U.S. as control variables. The model uses quarterly observations for the period 2005Q1 to 2024Q2. The results demonstrate that GDP increases the consumer confidence indicator, whereas depreciation in the Mexican peso negatively affects it. However, Okun’s misery index negatively affects the consumer confidence indicator only in the long term.