The Real-Time State of European Household Finances

The Covid pandemic and its associated policy responses had unprecedented effects on individual incomes and consumer expenditures. At the same time, lockdowns interrupted the collection of household-level data, including those published in the European Household Finance and Consumption Survey (HFCS). In this paper, we extrapolate the HFCS into the pandemic using a structural micro-founded model which uses macro time series data to simulate the evolution of household incomes, assets and liabilities as well as consumption spending. The model provides sharp predictions on changes in financial vulnerability and economic inequality during the pandemic and on post-pandemic household spending.