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

Dimitris Christelis (), Dimitris Georgarakos (), Tullio Jappelli () and Geoff Kenny

CSEF Working Papers from Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy

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. (search for similar items in EconPapers)
JEL-codes: D12 D81 E21 G51 H31 (search for similar items in EconPapers)
Date: 2020-12-04, Revised 2020-12-18
New Economics Papers: this item is included in nep-eec and nep-mac
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Related works:
Working Paper: The Covid-19 Crisis and Consumption: Survey Evidence from Six EU Countries (2020) Downloads
Working Paper: The Covid-19 crisis and consumption: survey evidence from six EU countries (2020) Downloads
Working Paper: The Covid-19 Crisis and Consumption: Survey Evidence from Six EU Countries (2020) Downloads
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