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Consumer Spending in the Covid-19 Pandemic: Evidence from Card Transactions in Latvia

Ludmila Fadejeva, Boriss Siliverstovs, Karlis Vilerts and Anete Brinke
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Boriss Siliverstovs: Bank of Latvia
Anete Brinke: Bank of Latvia

No 2022/01, Discussion Papers from Latvijas Banka

Abstract: We use a novel card transaction data from the Latvijas Banka to study the consumption response to the Covid-19 pandemic in Latvia throughout three separate waves of the pandemic. We find that card transaction activity fell similarly in all three waves. There is also some suggestive evidence that during the second and third waves of the pandemic, the consumption response was largely caused by the containment measures instead of the behavioural adjustment of consumers. The consumption response varied greatly across different sectors with the Airlines and Entertainment sectors faring the worst. However, the situation was not homogeneous during the three waves of the pandemic, given the changing composition of the containment measures. We show that merchants with a higher share of online transactions in the prepandemic period fared better than others during the second and the third waves of the pandemic. Similarly, we also find evidence that investment in online platforms during the initial phases of the pandemic seems to have resulted in better resilience in the following waves. Finally, we show that the nowcasting model with card transaction data outperforms all benchmark models when it comes to retail nowcasting and yields a notable improvement in forecasting metrics.

Keywords: card transactions; consumer spending; Covid-19; retail trade nowcasting (search for similar items in EconPapers)
JEL-codes: C32 C53 E21 E27 (search for similar items in EconPapers)
Date: 2022-02-15
New Economics Papers: this item is included in nep-cis, nep-mac, nep-pay and nep-tra
References: Add references at CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ltv:dpaper:202201

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