Spending Response to a Predictable Increase in Mortgage Repayments: Evidence from Expiring Interest-Only Loans

We study how homeowners' consumption responds to a negative and anticipated disposable income shock: the beginning of the amortization period on interest-only mortgages. We identify spending behavior through an event study approach, by matching loan-level data that covers the universe of Danish mortgages to detailed administrative registries on borrowers. In response to an average increase in installments worth 9 percent of income, consumption drops by 3 percent of income, when amortization begins. The reduction in expenditure is persistent. Borrowers who fail to smooth consumption are highly leveraged and likely to be denied a new interest-only loan, upon expiration.

When the Pandemic Creates Behavioral Changes and Economic Crisis: The COVID-19 Pandemic and the Implications for Policy Making

The COVID-19 pandemic is no longer simply a “health crisis” but seems to have far-reaching impacts and implications as well. The pandemic has led to an unprecedented decline in consumer confidence (demand shock) as people quickly changed their spending behavior to focus on basic needs. In response, the government has taken actions to boost consumer confidence and spending through stimulus packages and other aid. This research uses a public database of private sector data with current information on consumer spending and employment and implements Abraham Maslow’s psychological theory, the hierarchy of needs, and Keynesian economics to explain consumer spending behaviors and the U.S. government’s response to the pandemic. Three hypotheses are developed and tested using regression analysis. First, the findings of the regression discontinuity show significantly higher spending in industries fulfilling basic needs than in nonessential sectors. Second, a causal relationship was found between aggregate demand, more specifically consumer spending, and employment, revealing the distinctness of the pandemic-caused recession driven by coronavirus fear. The final regression discontinuity was tested to observe the effect of stimulus checks (CARES Act) on spending and economic recovery, revealing positive impacts of boosting aggregate demand. This study provides evidence that while high-income households and individuals were the least impacted by the pandemic regarding employment, they showed the most dramatic changes in spending behavior. The study provides discussions and implications as to how to mitigate the effects of the COVID-19 recession in the U.S.

The Role of Financial Behavior in Mediating the Influence of Socioeconomic Characteristic and Neuroticism Personality Traits on Financial Satisfaction

The inherent socioeconomic characteristics and personality traits of individuals can have direct effects on their financial satisfaction. There has been no research that examines the effects of these two factors on financial satisfaction with financial behavior acting as the mediating variable even though it is very important to know whether individuals with certain characteristics and personality traits are able to increase their financial satisfaction by improving their financial behavior. 2. Methods This research involved 600 respondents in Medan, Indonesia. The primary data were obtained from the questionnaire. Data analyses were performed by using the partial least squares structural equation modeling (PLS-SEM) method. 3. Results and findings The test results show that at 5% of alpha, the financial behavior, which consists of investment behavior, debt behavior, and spending behavior, is able to mediate the effects of gender, age, level of education, income, and neuroticism traits on financial satisfaction. In addition, it is also found that the higher the individuals' scores on neuroticism are, the worse their investment, debt, and spending behaviors will be; however, their herding behavior and financial dissatisfaction increase. Moreover, these people are also not financially well-off. Keywords: Debt behavior, financial satisfaction, investment behavior, neuroticism personality traits, spending behavior.

How e-wallets encourage excessive spending behavior among young adult consumers?

Purpose As it gains more popularity, e-wallets drive its users to spend more. Therefore, the purpose of this paper is to explore how and why e-wallets may encourage excessive spending behavior among young adult consumers. Design/methodology/approach An exploratory sequential or QUAL-QUANT design, combining qualitative and quantitative, is used in this study. It is a type of mixed-method design consisting of both the core and supplementary methods. The qualitative method is conducted in Study 1 using online focus group discussion to answer “why” and “how” questions, whereas the quantitative method is used in Study 2 to test or examine the hypothetical model. The questionnaires are extracted from focus group discussion in Study 1, which is further tested for validity and reliability and model estimation in Study 2. The model is evaluated using structural equation modeling. Findings Study 1 extracted four keywords to affect young adults spending behavior, easiness, promotions, self-control and perception of having more money (the illusion of liquidity). In Study 2, it is found that those four variables significantly affect spending behavior. Interestingly, it is also found in Study 2 that the illusion of liquidity mediates the relationship between self-control and spending behavior. Research limitations/implications During the COVID-19 pandemic, where a physical meeting is not encouraged, focus group discussion is conducted online via Zoom. Perhaps, this condition can be one limitation this study faced. Originality/value This study offers a theoretical contribution to the literature by exploring how and why e-wallet payment is connected to excessive spending behavior among young adult consumers. This study also provides a model that further explains the relationship between young adults’ spending behavior by adding the illusion of liquidity as the mediating variable.

A CONCEPTUAL STUDY ON THE IMPACT OF ONLINE SPENDING BEHAVIOR TOWARDS E-COMMERCE

As the covid-19 positive rate keeps increasing, the Indonesian government established a large-scale social restriction, or Pembatasan Sosial Berskala Besar (PSBB) to reduce the virus spread. At the same time e-commerce use is rapidly increasing, offering convenience to customers. With the existence of e-commerce, there is no need for physical contact. The objective of this paper is to determine the relationship between online spending and e-commerce use during a pandemic. The data used for this study was gathered from existing literature such as journals, books, and research papers that are related to the research topics. The scope & limitations are the covid-19 is unpredictable, the pandemic might give a different effect on consumption behavior in the future. The research was finally able to create a clear conceptual framework on the relationship between online spending behavior and e-commerce use based on the literature review. According to the framework, perceived behavioral cost, product variety, product comparison, application usability, safeness and healthiness, and recession in Indonesia would all have a direct impact on e-commerce use during a pandemic.

A Run for Their Money: Examining Changes in Runners’ Event-Related Expenditures

This study examines spending changes between the first and second year of participation in a mass participation sport event. Previous research has been inconclusive about anticipated spending changes from year one to year two, which may be attributed to the prominence of cross-sectional research designs. This study utilized a within-person, year-to-year design with a seven-year sample from a US running event (n = 247) to track spending from participants. Using a within-subject ANCOVA, expenditures across eight categories were analyzed as individuals progressed from first-time to repeat participant. Results show no significant differences across any of the spending categories. From the same time frame, a sample of one-off participants was generated (n = 6,257) to compare with the repeat participants, and significant differences emerged. These findings provide event organizers and community officials with information regarding the spending behavior of customers in their first and second years, allowing for a more tailored marketing approach.

City consumption profile: a city perspective on the spending behavior of citizens

In designing the city of the future, city managers and urban planners are driven by specific citizens’ behaviors. In fact, economic and financial behaviors, and specifically, which goods and services citizens purchase and how they allocate their spending, are playing a central role in planning targeted services. In this context, cashless payments provide an invaluable data source to identify such spending behaviors. In this work, we propose a methodology to extract the consumption behaviors of a large sample of customers through credit card transaction data. The main outcome of the methodology is a concise representation of the economic behavior of people residing in a city, the so-called city consumption profile. We inferred the city consumption profile from a network-based representation of the similarity among the customers in terms of purchase allocation; on top of which we applied a community detection algorithm to identify the representative consumption profiles. By applying the above methodology to a set of credit card transactions of an Italian financial group, we showed that cities, even geographically close, exhibit different profiles which makes them unique. Specifically, usage patterns focused on a single type of good/service—mono-categorical consumption profile—are the main factors leading to the differences in the city profiles. Our analysis also showed that there is a group of consumption profiles common to all cities, made up by purchases of primary goods/services, such as food or clothing. In general, the city consumption profile represents a tool for understanding the economic behaviors of the citizens and for comparing different cities. Moreover, city planners and managers may use it in the outline of city services tailored to the citizens’ needs.

Smells in Sustainable Environments: The Scented Silk Road to Spending

Humanity's demand for ecological resources and services exceeds what earth can regenerate in that year, creating an urgent need for more sustainable behavior. Here, the focus is on a particular factor that so far has been overlooked in facilitating sustainable behavior, namely smell. The two-fold aim of this study was (i) to investigate whether ambient scent could enhance customers' subjective experience and spending behavior in a sustainable environment, and (ii) to elucidate the affective and cognitive pathways from scent to spending. To test this, a double-blind field experiment was designed where customers of a second-hand clothing store (N = 57) could face one of three conditions: fresh linen scent (pleasant and semantically priming “clean clothing” increasing the products' value), vanilla sandalwood scent (pleasant control odor), or regular store odor (odorless control). Buttressed by prior research, the fresh linen scent was expected to cause the strongest increase in spending behavior due to its positive semantic association with the product (i.e., clean clothing). The results indeed showed that fresh linen scent almost doubled consumer spending vs. the odorless control and the pleasant control odor. Other factors potentially affecting consumer behavior (e.g., weekday, weather, odor awareness) were uncorrelated. Whereas a conceptually-driven mediation analysis showed that only fresh linen scent increased mood and evaluations of the store, staff, and products, these variables did not mediate the relation between scent and spending. An explorative structural equation model suggested cognitive priming to be mainly responsible for increasing consumers' spending in the fresh linen condition by enhancing the general store evaluation. Further support is needed to corroborate the indirect findings that specific scents can follow a “cold” semantic road and a “hot” affective road to spending. At minimum, consumers are no “zombies” that empty their pockets in the presence of whatever odor; the smell needs to have a meaningful link to the (sustainable) context at hand to influence consumer behavior.