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The Covid-19 Crisis and Consumption: Survey Evidence from Six EU Countries

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Abstract

Using new panel data from a representative survey of households in the six largest euro area economies, the paper estimates the impact of the Covid-19 crisis on consumption. The panel provides, each month, household-specific indicators of the concern about finances due to Covid-19 from the first peak of the pandemic until October 2020. The results show that this concern causes a significant reduction in non-durable consumption. The paper also explores the potential impact on consumption of government interventions and of another wave of Covid-19, using household-level consumption adjustments to scenarios that involve positive and negative income shocks. Pandemic-related financial concerns induce a significant reduction (increase) in the marginal propensity to consume in response to a positive (negative) income shock, an effect consistent with models of precautionary saving and liquidity constraints. These results are robust to endogeneity problems through the use of panel fixed effects models as well as partial identification methods that account also for time-varying unobservable variables, and provide informative identification regions of the average treatment effect of the financial concern due to Covid-19 under weak assumptions.

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  • Dimitris Christelis & Dimitris Georgarakos & Tullio Jappelli & Geoff Kenny, 2020. "The Covid-19 Crisis and Consumption: Survey Evidence from Six EU Countries," CSEF Working Papers 590, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy, revised 18 Dec 2020.
    • Handle: RePEc:sef:csefwp:590
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    Cited by:

    1. Giovanni Immordino & Tullio Jappelli & Tommaso Oliviero & Alberto Zazzaro, 2022. "Fear of COVID‐19 contagion and consumption: Evidence from a survey of Italian households," Health Economics, John Wiley & Sons, Ltd., vol. 31(3), pages 496-507, March.
    2. Georgarakos, Dimitris & Kenny, Geoff, 2022. "Household spending and fiscal support during the COVID-19 pandemic: Insights from a new consumer survey," Journal of Monetary Economics, Elsevier, vol. 129(S), pages 1-14.
    3. Andrej Cupak & Martin Cesnak & Jan Klacso & Martin Suster, 2021. "Fates of indebted households during the Corona crisis: Survey results from Slovakia," Working and Discussion Papers OP 2/2021, Research Department, National Bank of Slovakia.
    4. Bui, Dzung & Dräger, Lena & Hayo, Bernd & Nghiem, Giang, 2020. "Consumer Sentiment During the COVID-19 Pandemic: The Role of Others‘ Beliefs," Hannover Economic Papers (HEP) dp-680, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät, revised Apr 2021.
    5. Dzung Bui & Lena Dräger & Bernd Hayo & Giang Nghiem, 2021. "The Effects of Fiscal Policy on Households during the COVID-19 Pandemic: Evidence from Emerging Economies," IMK Working Paper 211-2021, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    6. repec:zbw:bofrdp:2021_010 is not listed on IDEAS
    7. Bui, Dzung & Dräger, Lena & Hayo, Bernd & Nghiem, Giang, 2021. "The Effects of Fiscal Policy on Households during the COVID-19 Pandemic," VfS Annual Conference 2021 (Virtual Conference): Climate Economics 242464, Verein für Socialpolitik / German Economic Association.
    8. Bui, Dzung & Dräger, Lena & Hayo, Bernd & Nghiem, Giang, 2022. "The effects of fiscal policy on households during the COVID-19 pandemic: Evidence from Thailand and Vietnam," World Development, Elsevier, vol. 153(C).
    9. Dietrich, Alexander M. & Kuester, Keith & Müller, Gernot J. & Schoenle, Raphael, 2022. "News and uncertainty about COVID-19: Survey evidence and short-run economic impact," Journal of Monetary Economics, Elsevier, vol. 129(S), pages 35-51.
    10. Bruno Albuquerque & Georgina Green, 2022. "Financial Concerns and the Marginal Propensity to Consume in COVID Times: Evidence from UK Survey Data," IMF Working Papers 2022/047, International Monetary Fund.
    11. Stanisławska, Ewa & Paloviita, Maritta, 2021. "Medium- vs. short-term consumer inflation expectations: Evidence from a new euro area survey," Bank of Finland Research Discussion Papers 10/2021, Bank of Finland.
    12. Bui, Dzung & Dräger, Lena & Hayo, Bernd & Nghiem, Giang, 2022. "The Marginal Propensity to Consume During the COVID-19 Pandemic: Evidence from Thailand and Vietnam," Hannover Economic Papers (HEP) dp-695, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
    13. Dräger, Lena & Bui, Dzung & Nghiem, Giang & Hayo, Bernd, 2021. "Consumer Sentiment During the COVID-19 Pandemic," VfS Annual Conference 2021 (Virtual Conference): Climate Economics 242375, Verein für Socialpolitik / German Economic Association.
    14. Thomas Crossley & Paul Fisher & Peter Levell & Hamish Low, 2021. "MPCs in an economic crisis: spending, saving and private transfers," IFS Working Papers W21/26, Institute for Fiscal Studies.
    15. Agénor, Pierre-Richard & Jackson, Timothy & Jia, Pengfei, 2021. "Macroprudential policy coordination in a currency union," European Economic Review, Elsevier, vol. 137(C).
    16. Stanisławska, Ewa & Paloviita, Maritta, 2021. "Responsiveness of consumers' medium-term inflation expectations : evidence from a new euro area survey," Research Discussion Papers 10/2021, Bank of Finland.
    17. Elisa Guglielminetti & Concetta Rondinelli, 2021. "Consumption and saving patterns in Italy during Covid-19," Questioni di Economia e Finanza (Occasional Papers) 620, Bank of Italy, Economic Research and International Relations Area.
    18. Marlena Piekut & Kamil Piekut, 2022. "Changes in Patterns of Consumer Spending in European Households," Sustainability, MDPI, vol. 14(19), pages 1-25, October.
    19. Albuquerque, Bruno & Varadi, Alexandra, 2022. "Consumption effects of mortgage payment," Bank of England working papers 963, Bank of England.
    20. Montserrat Guillen & Miguel Santolino & Xenxo Vidal-Llana, 2022. ""Inequality of subjective economic uncertainty and individual economic prospects in the pandemic period"," IREA Working Papers 202202, University of Barcelona, Research Institute of Applied Economics, revised Feb 2022.
    21. Pinkovetskaia Iuliia, 2022. "Impact of Covid-19 pandemic on household income: results of a survey of the economically active population," Studia Universitatis „Vasile Goldis” Arad – Economics Series, Sciendo, vol. 32(1), pages 43-57, March.
    22. Melanie Koch & Thomas Scheiber, 2022. "Mitigating the impact of the pandemic on personal finances in CESEE: descriptive evidence for 2020," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue Q2/22, pages 63-96.
    23. Bańnkowska, Katarzyna & Borlescu, Ana Maria & Charalambakis, Evangelos & Da Silva, António Dias & Di Laurea, Davide & Dossche, Maarten & Georgarakos, Dimitris & Honkkila, Juha & Kennedy, Neale & Kenny, 2021. "ECB Consumer Expectations Survey: an overview and first evaluation," Occasional Paper Series 287, European Central Bank.
    24. Barbara Gawior & Michal Polasik & Josep Lluís del Olmo, 2022. "Credit Card Use, Hedonic Motivations, and Impulse Buying Behavior in Fast Fashion Physical Stores during COVID-19: The Sustainability Paradox," Sustainability, MDPI, vol. 14(7), pages 1-16, March.
    25. Claude Bismut & Ismaël Ramajo, 2021. "Nominal and real interest rates in OECD countries, changes in sight after covid-19?," International Economics and Economic Policy, Springer, vol. 18(3), pages 493-516, July.

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    More about this item

    Keywords

    Covid-19; Consumption; Income Shocks; Marginal Propensity to Consume; Financial concerns; Fiscal policies.;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household

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