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

60 Pages Posted: 22 Dec 2020 Last revised: 8 Jan 2021

See all articles by Dimitris Christelis

Dimitris Christelis

Adam Smith Business School, University of Glasgow; Centre for Studies in Economics and Finance (CSEF), University of Naples Federico II; Center for Financial Studies (CFS); Netspar

Dimitris Georgarakos

European Central Bank (ECB) - Directorate General Research; Center for Financial Studies (CFS)

Tullio Jappelli

University of Naples Federico II

Geoff Kenny

European Central Bank (ECB)

Multiple version iconThere are 3 versions of this paper

Date Written: December 11, 2020

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.

Keywords: COVID-19, Consumption, Income Shocks, Marginal Propensity to Consume, Financial Concerns, Fiscal Policies

JEL Classification: D12, D81, E21, G51, H31

Suggested Citation

Christelis, Dimitrios and Georgarakos, Dimitris and Jappelli, Tullio and Kenny, Geoff, The COVID-19 Crisis and Consumption: Survey Evidence from Six EU Countries (December 11, 2020). Available at SSRN: https://ssrn.com/abstract=3751097 or http://dx.doi.org/10.2139/ssrn.3751097

Dimitrios Christelis (Contact Author)

Adam Smith Business School, University of Glasgow ( email )

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Centre for Studies in Economics and Finance (CSEF), University of Naples Federico II ( email )

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Center for Financial Studies (CFS) ( email )

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Netspar ( email )

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Tilburg, 5000 LE
Netherlands

Dimitris Georgarakos

European Central Bank (ECB) - Directorate General Research ( email )

Sonnemannstrasse 20
Frankfurt am Main, 60314
Germany

Center for Financial Studies (CFS) ( email )

Gr├╝neburgplatz 1
Frankfurt am Main, 60323
Germany

Tullio Jappelli

University of Naples Federico II ( email )

Geoff Kenny

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

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