What fuels spending? A study on non-durable spending and wealth dynamics in European countries

This study investigates the effects of changes in housing, stock, and money wealth on household non-durable spending across 11 emerging and 12 developed economies in the European Union (EU). Covering the period from 2000 Q1 to 2019 Q4, the estimation results reveal significant differences in how households in these economies adjust their non-durable spending in response to changes in wealth. In developed economies, housing and stock wealth positively affect non-durable consumption, with households leveraging financial assets to smooth consumption. In contrast, households in emerging economies show greater sensitivity to changes in money wealth, reflecting a reliance on more liquid assets and a weaker stock wealth effect due to lower financial market participation. The study emphasises the importance of tailored monetary and fiscal policies to address these disparities and enhance economic resilience. Additionally, it highlights the need for policies that promote financial literacy and improve access to financial markets in emerging economies.