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The COVID-19 pandemic and the consumption of nondurables and services

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  • Nikolaos Charalampidis
  • Justine Guillochon

Abstract

Contrary to the Great and other past US Recessions, the reduction in services consumption exceeds the decline in nondurables consumption during the COVID-19 pandemic. We study the drivers of this unprecedented phenomenon through the lens of an estimated multi-sector Dynamic Stochastic General Equilibrium (DSGE) model that distinguishes between nondurables and services sectors. We find that economic uncertainty is once again important, but it does not generate sectoral heterogeneity. Demand-side factors reallocating consumption across sectors and proxying for voluntary and regulatory social distancing measures, as well as the lack of wage adjustments in services despite plummeting employment, became influential during the pandemic.

Suggested Citation

  • Nikolaos Charalampidis & Justine Guillochon, 2022. "The COVID-19 pandemic and the consumption of nondurables and services," Applied Economics Letters, Taylor & Francis Journals, vol. 29(12), pages 1084-1095, July.
    • Handle: RePEc:taf:apeclt:v:29:y:2022:i:12:p:1084-1095
    DOI: 10.1080/13504851.2021.1908515
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