Thomas Scheiber (OeNB) - Will the COVID-19 pandemic leave lasting scars on economic sentiments of CESEE individuals?

Co-author: Melanie Koch (OeNB)

Recent literature on the impact of the GFC and the covid-19 pandemic suggests that sentiment shocks do have an impact on important macroeconomic variables such as output, retail sales, and unemployment. Apart from business cycle fluctuations, experiences of economic hardship might also have long lasting effects on individual consumption and saving behavior which in turn, might hold back the economic recovery and weaken monetary policy effectiveness.

Using OeNB Euro Survey data from fall 2020, we will briefly address the questions: Who has been affected by the covid-19 pandemic and how severely? We will look at the results along three dimensions: (1) across main socio-economic characteristics, (2) across regions and countries, (3) across different branches. The degree of covid-19 impact on individuals will be measured by an index using a comprehensive set of individual (self-reported) responses to the crisis related to income, consumption, saving and borrowing. As alternative measures we will use satellite nightlight data and covid-19 7-day incidences at a regional level.

In an analytical module we will test the hypotheses whether individuals that have been affected more severely by the crisis tend to have more pessimistic economic sentiments with respect to (1) the prospective financial situation of their household, (2) the economic prospects of their country over the next 5 years.

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