A1404
Title: The impact of the cost-of-living crisis on European households
Authors: Boris Chafwehe - Bank of England (United Kingdom) [presenting]
Mattia Ricci - JRC Seville (Spain)
Daniel Stoehlker - JRC Seville (Spain)
Abstract: The impact of the recent cost-of-living crisis on European households is studied using data on individual consumption, income, and wealth. The various channels are accounted for through which inflation affects individual households and for the monetary and fiscal policy responses to the inflationary shock. Results indicate that, on average, pension-age households lost nearly three times as much as their working-age counterpart due to the devaluation of their nominal wealth. Along the income distribution, differences in nominal asset holdings and in the evolution of nominal incomes imply that the inflationary shock was regressive for working-age households and mostly flat for pension-age households. Overall, high-income working-age households with mortgage debt gained the most from the inflationary surge, while older individuals with large nominal asset positions were those for which the largest losses were recorded. Fiscal policy measures were able to partially offset the impact of the crisis on the most vulnerable households. The interest rate response to the crisis partially offset the losses recorded by households with large nominal asset positions.
