As the cash reserves that were amassed during the pandemic dwindle, it’s a suitable time to examine consumption patterns which are losing momentum in the US and Europe. According to the behavioral economic theory of the wealth effect, changes in asset prices have an impact on household spending. However, in France, Germany, Spain, and the US, the income effect appears to have a more significant influence. The marginal propensity to consume (MPC) per 1% difference in disposable income is 0.21% for France, 0.71% for Germany, 0.78% for Spain, and 0.35% for the US. This underscores the significance of promoting household income as a driving force to achieve the much-needed economic stabilization.
Learn more here: https://www.allianz.com/en/economic_research/publications/specials_fmo/global-consumption-wealth.html
