How is confidence related to unemployment in Portugal?

Abstract

By the use of fuzzy logic, this paper shows how confidence is related to unemployment in Portugal. The results indicate it to be a worthwhile exercise, as the apparent importance of unemployment upon confidence is only revealed by the fuzzy logic approximation.

Acknowledgements

The author would like to thank the editor for useful suggestions. The usual disclaimer of course applies.

Notes

¹ As considered by the European Commission (2003), ‘the consumer confidence indicator is the arithmetic average of the balances (in percentage points) of the answers to the questions on the financial situation of households, the general economic situation, unemployment expectations (with inverted signs) and savings, all over the next 12 months’ (emphasis added).

² Clearly, for each new observation on the unemployment rate, consumers forget the oldest. The length of the window can thus be associated with the number of observations that consumers keep in their memory.

³ The normalized membership values were obtained from the non-normalized ones, i.e. those using expression (1) in order that they add up to 1.