The Nexus between Financial Crisis and Household Consumption: Evidence from Emerging Countries

Abstract

This paper stains to test the effects of financial crisis on household consumption. More specifically, an aggregate annual data from 36 emerging countries from 1990-2012, is used to estimate a model that capture the interrelationship between financial crisis and household consumption. Our findings show that emerging countries that have experienced financial crisis during the last three decades tend to experience a substantially greater contraction of their consumption level. Whatever the type of crisis considered, they are generally followed by a substantial contraction of their welfare. More specifically, banking crisis, in contrast to the currency ones, appears to have a more important impact on the standard living household. On the other hand, twin crisis seems to have a more pronounced impact than the two first ones.