The anatomy of consumption in a household foreign currency debt crisis
- This paper studies the consumption response to an increase in the domestic value of foreign currency household debt during a large depreciation. We use detailed consumption survey data that follows households for four years around Hungary’s 2008 currency crisis. We find that, relative to similar local currency debtors, foreign currency debtors reduce consumption approximately one-for-one with increased debt service, suggesting a role for liquidity constraints. We document a variety of margins of adjustment to the shock. Foreign currency debtors reduce both the quantity and quality of expenditures, consistent with nonhomothetic preferences and “flight from quality.” We find no effect on overall household labor supply, consistent with a weak wealth effect on labor supply. However, a small subset of households adjusts labor supply toward foreign income streams. Affected households also boost home pro- duction, suggesting a shift in consumption from money-intensive to time-intensive goods.
Author: | Gyozo Gyongyosi, Judit Rariga, Emil Verner |
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URN: | urn:nbn:de:hebis:30:3-619973 |
URL: | https://ssrn.com/abstract=3989915 |
DOI: | https://doi.org/10.2139/ssrn.3989915 |
Parent Title (English): | SAFE working paper ; No. 332 |
Series (Serial Number): | SAFE working paper (332) |
Publisher: | SAFE |
Place of publication: | Frankfurt am Main |
Document Type: | Working Paper |
Language: | English |
Year of Completion: | 2021 |
Year of first Publication: | 2021 |
Publishing Institution: | Universitätsbibliothek Johann Christian Senckenberg |
Release Date: | 2022/01/10 |
Issue: | December 2021 |
Page Number: | 75 |
HeBIS-PPN: | 490517390 |
Institutes: | Wirtschaftswissenschaften / Wirtschaftswissenschaften |
Wissenschaftliche Zentren und koordinierte Programme / House of Finance (HoF) | |
Wissenschaftliche Zentren und koordinierte Programme / Sustainable Architecture for Finance in Europe (SAFE) | |
Dewey Decimal Classification: | 3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft |
Sammlungen: | Universitätspublikationen |
Licence (German): | Deutsches Urheberrecht |