Are Italian consumer confidence adjustments asymmetric? A macroeconomic and psychological motives approach

• This paper estimates the determinants of Italian consumer confidence indicator.
• Consumers respond asymmetrically to disequilibrium error (TAR model).
• The speed of adjustments is quite consistent (M-TAR model).
• TAR findings are consistent with the psychological bias approach.

This paper estimates the determinants of Italian consumer confidence indicator (CCI) using time series methods. We find there exists a long-run relationship between CCI and its determinants when an important political event ‘operation clean hands’, captured by a dummy, is considered. Using the asymmetric error correction model (Enders & Siklos, 2001), we find that consumers respond asymmetrically to different types of disequilibrium error under threshold autoregressive (TAR) adjustment specification. These findings are consistent with the psychological bias approach (Bovi, 2009).