Consumer Confidence Linkages Among European Union Countries: Which Countries Tend to Be Followers of Others?


In this study we use hierarchical cluster analysis to identify clusters in terms of consumer confidence and test the hypothesis whether Western and non-formerSoviet-Union Northern countries (Sweden, Denmark or Finland) may be “the core”, while Southern and former USSR countries may be considered as “periphery” in terms of consumer confidence (in respect with Krugman’s “core-periphery” model). Results show that consumer confidence similarities define clusters of EU countries, located in the same sub-region of Europe in cases of all Northern Europe countries and almost all Western Europe countries (excluding Netherlands, Luxembourg and Austria). We find that Southern and Central–Eastern EU countries don’t have their united, single socio–economic behaviour pattern, but rather tend to distribute to various clusters in terms of consumer confidence. Our test for hypothesis of possible “core” and “periphery” countries in terms of consumer show that some of Western and non-former-Soviet-Union Northern countries (in this case we identified Sweden, United Kingdom and Luxembourg) may be considered as “the core”, while the rest Southern and former USSR EU countries may be considered as “periphery”.



Keywords: consumer confidence, cluster analysis, core-periphery

[1] Akhtar, S. et al., 2011. The asymmetric impact of consumer sentiment announcements on Australian foreign exchange rates. Australian Journal of Management, 36(3), 387-403. http://10.1177/0312896211410723

[2] Beržinskienė, D. and Stoškus, S., 2006. The Research of Work Search Method Choice Applying the Cluster Analysis. Engineering Economics, 48(3), 50–55.

[3] Breinlich H., 2006. The spatial income structure in the European Union - What role for economic geography? Journal of Economic Geography, 6, 593-617.

[4] Bremmer, D., 2008. Consumer Confidence and Stock Prices. – Paper presented at 72nd Annual Meeting of the Midwest Economics Association Hyatt Regency, Chicago, Illinois.

[5] Dardac N. and Boitan A. I., 2009. A Cluster Analysis Approach for Bank’s Risk Profile: The Romanian Evidence. European Research Studies Journal, 1, 109–118.

[6] Dées, S. and Brinca, P. S., 2011. Consumer confidence as a predictor of consumption spending: evidence for the United States and the euro area. – Working paper No. 1349, ECB.

[7] Dees, S. et al., 2007. Exploring the international linkages of the euro area: a global VAR analysis. Journal of applied econometrics, 22(1), 1-38.

[8] Ercan, H. and Sayaseng, S., 2016. The cluster analysis of the banking sector in Europe. Economics and Management of Global Value Chains, 111–127.

[9] Eurovoc, 2018. Domains and MT. 7206 Europe. [online] Available at: http: // [accessed 2018 01 10].

[10] Fallah B. N. et al., 2011. New economic geography and US metropolitan wage inequality. Journal of Economic Geography, 11, 865-895.

[11] Forte, R. and Santos N., 2015. A cluster analysis of FDI in Latin America. Latin American Journal of Economics-formerly Cuadernos de Economía, 52(1), 25–56.

[12] Galesi, A and Lombardi, M. J., 2009. External shocks and international inflation linkages: a global VAR analysis. – Working paper No. 1062, European Central Bank.

[13] Galesi, A. and Sgherri, S., 2009. Regional Financial Spillovers Across Europe: A Global VAR Analysis. – Working paper No. 23, International Monetary Fund.

[14] Gormus, S. and Gunes, S., 2010. Consumer Confidence, Stock Prices and Exchange Rates: The Case Of Turkey. Applied Econometrics and International Development, 10(2), 103-114.

[15] Hawkesby M. I. C. and Stevens, I., 2003. Large Complex Financial Institutions: Common Influences on Asset Price Behaviour? Bank of England Financial Stability Review, 15(12), 91–101.

[16] Islam, T. U. and Mumtaz, M. N, 2016. Consumer Confidence Index and Economic Growth: An Empirical Analysis of EU Countries. EuroEconomica. Issue 2(35)/2016.

[17] Jonsson, A. and Lindén, S., 2009. The quest for the best consumer confidence indicator. – Working paper No. 372, European Comission.

[18] Katona, G., 1946. Psychological analysis of business decisions and expectations. American Economic Review, 36, 44-62.

[19] King, R.G. and Kurmann, A., 2002. Expectations and the Term Structure of Interest Rates: Evidence and Implications. Economic Quarterly Volume, 88(4), 1-17.

[20] Koukouritakis, M. et al., 2013. Linkages between the Eurozone and the southeastern European countries: a global VAR analysis. – Working paper No. 163, Bank of Greece.

[21] Krugman, P., 1991. Increasing Returns and Economic Geography. Journal of Political Economy, 99, 483–499.

[22] Kuzmanović, M. and Sanfey, P., 2012. Can consumer confidence data predict real variables? Evidence from Croatia. – Working Paper No. 151, European Bank for Reconstruction and Development.

[23] Lahiri, K. and Zhao, Y., 2013. Determinants of Consumer Sentiment: Evidence from Household Survey Data. Proceedings of the New York State Economics Association. 4, 97-106.

[24] Li, D. and Li, G., 2014. Are Household Investors Noise Traders? Evidence from Belief Dispersion and Stock Trading Volume. Finance and Economics Discussion Series, Divisions of Research & Statistics and Monetary Affairs Federal Reserve Board, Washington, D.C.

[25] Liu, Q. J. and Ren, D. X., 2015. Research on the Structure of Public Fiscal Expenditure Based on the Cluster Analysis Methods. Modern Economy, 6, 700-706.

[26] Medikienė, M. and Dapkus, M., 2015. The Research of Determinants of European Union Developed and Developing Countries Consumer Confidence. Applied economics: systematic research, 9(2), 13-29.

[27] Medikienė, M. and Dapkus, M., 2017. Linkages of Consumer Confidence among European Union Countries. Applied economics: systematic research, 11(2), 13-30.

[28] Mudiriza, G. and Edwards, L., 2017. Can the New Economic Geography explain regional wage disparities in South Africa? Proceedings of Biennial Conference of the Economic Society of South Africa. Grahamstown, South Africa.

[29] Neisingh, P. and Stokman, A., 2013. What Drives Consumer Confidence in Times of Financial Crises? Evidence from the Netherlands. – Working Paper No. 394, De Nederlandsche Bank.

[30] Neves et al., 2016. The unidirectional relationship between consumer confidence and PSI-20 returns – The influence of the economic cycle. Revista Contabilidade e Finanças-R. Cont. Fin. – USP, São Paulo 27, 72: 363 – 377.

[31] Pesaran, M. H. et al., 2004. Modeling Regional Interdependencies Using a Global Error-Correcting Macroeconometric Model. Journal of Business & Economic Statistics, 22(2), 129-162.

[32] Pukelienė, V. et al., 2016. The evaluation of structure of Lithuania expenditure on public services in the context of EU countries. Applied Economics: Systematic Research, 10(1), 155-169.

[33] Stevenson, A., 2010. In: 3rd ed. [online] Available at: https://en.oxforddictionaries. com/definition/consumer_confidence [Accessed 01 March 2018].

[34] Sun, Y. et al., 2013. Cross-Country Linkages in Europe: A Global VAR Analysis. – Working paper No. 194, International Monetary Fund.

[35] Vansteenkiste, V., 2007. Regional housing market spillovers in the US: lessons from regional divergences in a common monetary policy setting. – Working paper No. 708, European Central Bank.

[36] Wang, J. C. and Berger-Thomson, L., 2015. Consumer Sentiment Surveys. – Bulletin, December quarter 2015, Reserve Bank of Australia.

[37] Zivadinovic et al., 2009. Cluster and Factor Analysis of Structural Economic Indicators for Selected European Countries. WSEAS TRANSACTIONS on BUSINESS and ECONOMICS. 6(7), 331-341.

[38] Medikienė, M., Dapkus, M. and Maditinos, D., 2018. Consumer Confidence Linkages among European Union Countries: Cluster Analysis. Applied economics: systematic research, 12(1), 27-50.

[39] European Commission, Directorate-General for Economic and Financial Affairs, 2016. A User Manual to the Joint Harmonised EU Programme of Business and Consumers Surveys.