THE FACTORS CAUSING CONSUMER BEHAVIOR: ASYMMETRIC CAUSALITY AND CLUSTER ANALYSIS FOR EU COUNTRIES THROUGH CONSUMER CONFIDENCE INDEX

Abstract

The main purpose of this study is to determine the factors affecting consumer behavior for 27 European Union (EU) countries and to analyze which country consumers have similar behavior patterns. The dataset covers the period from 2012M01 to 2019M12. First, we used asymmetric causality tests to examine the relationships between consumer confidence index and the variables that influence it. Asymmetric causality tests consider the effect of asymmetric information, assuming that the response of units to positive and negative shocks may differ. In this way, it may occur some confidential information that cannot be detected in symmetric tests, through the asymmetric tests. Second, we applied the cluster analysis to outputs of asymmetric causality tests. We found that the indicator that has the most impact on consumer confidence index is stock market indices. Also, unemployment rate, consumer price index, and election periods are influencing consumer confidence index significantly. As a result of the cluster analysis, we detected the existence of five different country groups. Some of these groups included countries with similar geographical conditions and similar cultures.

Keywords

• Consumer Confidence Index
• Economic Indicators
• Asymmetrical Causality Analysis
• Cluster Analysis
• EU Counties

References

1. Akerlof, G. A. (1978). The market for “lemons”: Quality uncertainty and the market mechanism. Uncertainty in Economics. 235-251. https://doi.org/10.1016/B978-0- 12-214850-7.50022-X.
2. Albayrak T. & Aksoy S. (2008). Tüketici davranışında temel yaklaşımlar. Journal of Marketing and Marketing Research, 2(3), 1-19.
3. Alsem, K. J., Brakman, S., Hoogduin, L., & Kuper, G. (2008). The impact of newspapers on consumer confidence: Does spin bias exist? Applied Economics, 40(5), 531-539. https://doi.org/10.1080/00036840600707100.
4. Arisoy, I. (2012). A VAR analysis of the relationship between confidence indexes and selected macroeconomic variables: the case for Turkey. Maliye Dergisi, 162, 304- 315.
5. Beltran, H., & Durré, A. (2003). The determinants of consumer confidence: The case of United States and Belgium. CORE Discussion Paper No. 53/2003.
6. Bettman, J. R. (1971). The structure of consumer choice processes. Journal of Marketing Research, 8(4), 465-471.
7. Bildirici, M. E., & Badur, M. M. (2019). The effects of oil and gasoline prices on confidence and stock return of the energy companies for Turkey and the US. Energy, 173, 1234-1241. https://doi.org/10.1016/j. energy.2019.02.137.
8. Breitung, J., & Candelon, B. (2006). Testing for short-and long-run causality: A frequency-domain approach. Journal of econometrics, 132(2), 363-378. https://doi.org/10.1016/j. jeconom.2005.02.004.

9. Brodeur, A. (2018). The effect of terrorism on employment and consumer sentiment: Evidence from successful and failed terror attacks. American Economic Journal: Applied Economics, 10(4), 246-282. https://doi.org/10.1257/ app.20160556. Çelik, S. (2010). An unconventional analysis of consumer confidence index for the Turkish economy. International Journal of Economics and Finance Studies, 2(1), 121-129.
10. Çevik, E. İ., Korkmaz, T., & Çevik, E. (2017). Testing causal relation among central and eEastern European equity markets: Evidence from asymmetric causality test. Economic Research-EkonomskaIstraživanja, 30(1), 381-393. http://dx.doi.org/10.1080/133167 7X.2017.1305774.
11. De Boef, S. & Kellstedt, P. M. (2004). The political (and economic) origins of consumer confidence. American Journal of Political Science, 48(4), 633-649. https://doi. org/10.1111/j.0092-5853.2004.00092.x
12. Dostál, P., & Pokorný, P. (2009). Cluster analysis and neural network. Brno University of Technology. Retrieved February 10, 2022. https://www2.humusoft.cz/www/ papers/TCP08/025_dostal.pdf
13. Engel, J. F., Blackwell, R. D.& Miniard, P. W. (2005). Consumer behavior (10th eds.). South-Western College Pub.
14. Eurostat, Business and consumer surveys, https:// ec.europa.eu/eurostat/cache/metadata/en/ei_bcs_ esms.htm , Access on 14.09.2023
15. Foxall, G. (1990). Consumer psychology in behavioral perspective. Beard Books.
16. Garner, C. A. (2002). Consumer confidence after September 11. Economic Review-Federal Reserve Bank of Kansas City, 87(2), 5-26.
17. Graeff, T. (2002). Consumer confıdence and consumer response to the September 11 terrorist attacks. Marketing Management Journal, 12(2).
18. Granger, C. W. (1969). Investigating causal relations by econometric models and cross-spectral methods. Econometrica: Journal of the Econometric Society, 37(3), 424-438. https://doi.org/1912791.
19. Granger, C. W., & Yoon, G. (2002). Hidden cointegration. U of California, Economics Working Paper No. 2002-02. http://dx.doi.org/10.2139/ssrn.313831.
20. Howard, J. A.& Sheth, J. N. (1969). The Theory of Buyer Behavior. New York, 63.
21. Hacker, R. S., & Hatemi-J, A. (2010). HHcte: GAUSS module to Apply a Bootstrap Test for Causality with Endogenous Lag Order. Statistical Software Components, Boston College Department of Economics. http://fmwww. bc.edu/repec/bocode/h/HHcte.prg.
22. Hatemi-J, A. (2012). Asymmetric causality tests with an application. Empirical Economics, 43(1), 447-456. https://doi.org/10.1007/s00181-011-0484-x.
23. Jisana, T. K. (2014). Consumer behaviour models: An overview. Sai Om Journal of Commerce & Management, 1(5), 34-43.
24. Karasoy Can, H. G., & Yüncüler, Ç. (2018). The explanatory power and the forecast performance of consumer confidence indices for private consumption growth in Turkey. Emerging Markets Finance and Trade, 54(9), 2136-2152. https://doi.org/10.1080/154049 6X.2017.1358608.
25. Katona, G. (1968). Consumer behavior: Theory and findings on expectations and aspirations. The American Economic Review, 58(2), 19-30.
26. Kaufman, L. R., & Rousseeuw, P. PJ (1990). Finding groups in data: An introduction to cluster analysis. Hoboken NJ John Wiley & Sons Inc, 725.
27. Kaynas, M. (2012). Consumers irrational behaviours and their economic outcomes. Doctoral Dissertation, İstanbul Kültür University.
28. Kim, J. (2016). Consumer confidence and economic activity: What causes what? Korea and the World Economy, 17(2), 183-212.
29. Klopocka, A. M. (2017). Does consumer confidence forecast household saving and borrowing behavior? Evidence for Poland. Social Indicators Research, 133(2), 693-717. https://doi.org/10.1007/s11205-016-1376-4.
30. Kotler, P. (1965). Behavioral models for analyzing buyers. Journal of Marketing, 29(4), 37-45. https://doi.org/10. 1177%2F002224296502900408.
31. Kumar, V., Leone, R. P., & Gaskins, J. N. (1995). Aggregate and disaggregate sector forecasting using consumer confidence measures. International Journal of Forecasting, 11(3), 361-377. https://doi. org/10.1016/0169-2070(95)00594-2.
32. Lahiri, K., & Zhao, Y. (2016). Determinants of consumer sentiment over business cycles: Evidence from the US surveys of consumers. Journal of Business Cycle Research, 12(2), 187-215. https://doi.org/10.1007/ s41549-016-0010-5.
33. Merkle, D. M., Langer, G. E.& Sussman, D. (2003). Consumer confidence: Measurement and meaning. Conference of the American Association for Public Opinion Research. ABC News New York, NY.
34. Neisingh, P., & Stokman, A. (2013). What drives consumer confidence in times of financial crises? Evidence for the Netherlands. Netherlands Central Bank, Research Department. https://dx.doi.org/10.2139/ ssrn.2338977.
35. Oduh, M. O., Oduh, M. O., & Ekeocha, P. C. (2012). The impact of consumer confidence and expectation on consumption in Nigeria: Evidence from panel data. European Journal of Business and Management, 4(9), 86-100.
36. Ozsagir, A. (2007). Trust factor in economy. Electronic Journal of Social Sciences, 6(20), 46-62.
37. Papatya, N. (2005). The motivation models about consumer behaviours: A research in a retail firm about the cleaning and personal care products. Süleyman Demirel University Journal of Faculty of Economics and Administrative Sciences, 10(1), 221-240.
38. Paradiso, A., Kumar, S., & Margani, P. (2014). Are Italian consumer confidence adjustments asymmetric? A macroeconomic and psychological motives approach. Journal of Economic Psychology, 43, 48-63. https://doi.org/10.1016/j.joep.2014.04.006.
39. Ramalho, E. A., Caleiro, A., & Dionfsio, A. (2011). Explaining consumer confidence in Portugal. Journal of Economic Psychology, 32(1), 25-32. https://doi.org/10.1016/j. joep.2010.10.004.
40. Rodrigues, L. M. M. (2006). An evaluation of the factors influencing the adoption of e-commerce in the purchasing of leisure travel by the residents of Cascais, Portugal Doctoral Dissertation, Bournemouth University.
41. Salleh, S. S., Aziz, N. A. A., Mohamad, D., & Omar, M. (2012). Combining mahalanobis and jaccard distance to overcome similarity measurement constriction on geometrical shapes. International Journal of Computer Science Issues (IJCSI), 9(4), 124.
42. Sartell, E. A. (2014). The impact of national debt and budget deficits on US consumer confidence. Doctoral Dissertation, Anderson University.
43. Spence, M. (1978). Job market signaling. Uncertainty in Economics. 281-306. https://doi.org/10.1016/B978-0- 12-214850-7.50025-5.
44. Stiglitz, J. E. (1974). Incentives and risk sharing in sharecropping. The Review of Economic Studies, 41(2), 219-255. https://doi.org/10.2307/2296714.
45. Svensson, H. M., Albæk, E., Van Dalen, A., & De Vreese, C. H. (2017). The impact of ambiguous economic news on uncertainty and consumer confidence. European Journal of Communication, 32(2), 85-99. https://doi. org/10.1177%2F0267323116677205. Tamasauskas D., Sakalauskas V. and Kriksciuniene D. (2012). Evaluation framework of hierarchical clustering methods for binary data. 2012 12th International Conference on Hybrid Intelligent Systems (HIS), pp. 421-426, https://doi.org/10.1109/ HIS.2012.6421371.
46. Tobback, E., Naudts, H., Daelemans, W., de Fortuny, E. J., & Martens, D. (2018). Belgian economic policy uncertainty index: Improvement through text mining. International Journal of Forecasting, 34(2), 355-365. https://doi.org/10.1016/j.ijforecast.2016.08.006.
47. Toda, H. Y., & Yamamoto, T. (1995). Statistical inference in vector autoregressions with possibly integrated processes. Journal of econometrics, 66(1-2), 225-250. https://doi.org/10.1016/0304-4076(94)01616-8.
48. Vanlaer, W., Bielen, S., & Marneffe, W. (2020). Consumer confidence and household saving behaviors: A cross-country empirical analysis. Social Indicators Research, 147(2), 677-721. https://doi.org/10.1007/s11205- 019-02170-4.
49. Vuchelen, J. (1995). Political events and consumer confidence in Belgium. Journal of Economic Psychology, 16(4), 563-579. https://doi. org/10.1016/0167-4870(95)00028-6.
50. Yılancı, V., & Bozoklu, S. (2014). Turk Sermaye Piyasasinda Fiyat ve Islem Hacmi Iliskisi: Zamanla Degisen Asimetrik Nedensellik Analizi / Price and trade volume relationship in Turkish stock market: A time-varying asymmetric causality analysis. Ege Akademic Review, 14(2), 211-220.
51. Zagórski, K. & McDonnell, J. S. (1995). Consumer confidence indexes as social indicators. Social Indicators Research, 36(3), 227-246. https://doi. org/10.1007/BF01078815.
52. Zaichkowsky, J. L. (1991). Consumer behavior: Yesterday, today, and tomorrow. Business Horizons, 34(3), 51-58.