The Persistence Of The Persistence Of Macroeconomic Shock Macroeconomic Shock Effects on Russian Effects on Russian Household ConsumptionHousehold Consumption

Yana Yushkina

QuestionQuestionHow do macroeconomic crises

affect household consumption of food items, non-food items, and durables in Russia?

Magnitude Persistence

MotivationMotivation

• Example of 2007-2009 crisis• Important to know how consumption is affected• Permanent or temporary effect?• Amplification of effect in transition economies

Russia’s GDPRussia’s GDP

Household Consumption in Household Consumption in RussiaRussia

Recent trendsRecent trends

TheoryTheoryModigliani and Brumberg (1954)

◦Intertemporal utility maximization

Friedman (1957)

Consumption Smoothing Consumption Smoothing LiteratureLiteratureCommon approaches

◦Empirical estimation◦Instrumenting for permanent income◦Response to predictable changes in

incomeAnother approach

◦Unpredictable exogenous shock effects Stillman (2003), Skoufias (2003) My contribution

DataDataRussia Longitudinal Monitoring

Survey (RLMS) Contains information about

household- level expenditures, income, and demographic characteristics

Covers1992-2007

MethodologyMethodologyRun panel regressions on different types (f,nf,d)

of consumption as well as aggregate consumption

Expect durables to be more affected

ln Ch,t = β1 ln Ch,t-1 + β2 ln Yh,t + β3 ln Yh,t-1 + β4 MacroVart

+ β5 Household Characteristicsht

+ β6 Crisist * ln Yh,t

+ β7 Crisist-1 * ln Yh,t

+ β8 Householdh

+ β9 Yeart

+εh,t

IssuesIssuesDynamic panel bias

Special thanks to Special thanks to Prof. Alpanda and Prof. Prof. Alpanda and Prof.

Barbezat!Barbezat!