Consumption Smoothing via Product Markets
63 Pages Posted: 8 Mar 2020 Last revised: 16 Mar 2024
Date Written: March 12, 2024
Abstract
We investigate how households adjust their shopping behavior in response to financial shocks. Our results show that households exhibit heightened price consciousness in financial downturns. They patronize discount stores more, purchase more products they perceive as deals, use coupons more frequently, and consume less nutritious food. Discount stores experience an upswing in sales, while high-end establishments witness declining sales during financially stressful times. These observations underscore the pivotal role of product markets in facilitating consumers’ consumption smoothing, particularly in scenarios where borrowing is not a viable recourse.
Keywords: Consumption, Financial Stress, Personal Finance, Retail Markets
JEL Classification: D1, I31, L81, P36
Suggested Citation: Suggested Citation