Consumer confidence on heating oil prices : an empirical study of their relationship for European Union in a nonlinear framework

Abstract

The present paper studies the EU consumer sentiment - heating oil stock prices relationship given the recent changes in the EU economy with the assistance of threshold cointegration. According to our findings, the existence of linearity against threshold cointegration is rejected for all the variables with the exception that of skewness, while the estimation of the threshold vector error correction model does not confirm the short-term dynamics in most cases. Having in mind that oil prices can affect economic activity in real and financial terms and is perceived as news by the consumers, the conclusion reached is in line with the existing literature, according to which consumer confidence is strongly affected by the news dissemination and by the signals of economic growth. The major practical implication of the study is the policy makers' acquisition with tools to create economic condition that improve consumer confidence and promotes economic growth