Download This PaperConsumption Smoothing via Product Markets
53 Pages Posted: 17 Oct 2024 Last revised: 21 May 2026
Date Written: January 25, 2025
Abstract
We investigate how households adjust their shopping behavior in response to financial shocks. Our results show that households visit stores more frequently but buy fewer products and spend less in financial downturns. When money is tight, they switch to cheaper products, use more coupons, and reduce bulk purchases. During financially stressful times, households shrink the set of stores that they visit, mainly by discarding high end stores, but also vary the stores within the same set. Our store-level analysis shows that heightened financial stress in the area is associated with a decline in sales of all products, but much less so for the cheaper products. Our results underscore the pivotal role of product markets in facilitating consumption smoothing.
Keywords: Consumption, Financial Stress, Personal Finance, Retail Markets
JEL Classification: D1, I31, L81, P36
Suggested Citation: Suggested Citation
Irem Demirci
Nova School of Business and Economics ( email )
Campus de Carcavelos
Rua da Holanda, 1
Carcavelos, 2775-405
Portugal