Transcript The persistence of macroeconomic shock effects on Russian

The Persistence Of
Macroeconomic Shock Effects
on Russian Household
Consumption
Yana Yushkina
Question

How do macroeconomic crises affect
household consumption of food items,
non-food items, and durables in Russia?
 Magnitude
 Persistence
Motivation
Crisis
↓ Consumer
Confidence
Economic
Slowdown
• Example of 2007-2009 crisis
• Important to know how consumption is affected
• Permanent or temporary effect?
• Amplification of effect in transition economies
Russia’s GDP
Household Consumption in Russia
Figure 1.1. Consumption in Russia 1994-2003
12000
Real 1992 roubles
10000
8000
6000
4000
2000
0
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
Source: Gerry and Li (2004)
Recent trends
Theory

Modigliani and Brumberg (1954)
◦ Intertemporal utility maximization

Friedman (1957)
Consumption Smoothing Literature

Common approaches
◦ Empirical estimation
◦ Instrumenting for permanent income
◦ Response to predictable changes in income

Another approach
◦ Unpredictable exogenous shock effects
 Stillman (2003), Skoufias (2003)
 My contribution
Data
Russia Longitudinal Monitoring Survey
(RLMS)
 Contains information about householdlevel expenditures, income, and
demographic characteristics
 Covers1992-2007

Methodology


Run 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
Issues

Dynamic panel bias
Special thanks to
Prof. Alpanda and Prof. Barbezat!