Rising Prices and Living Standards: Household Consumption Adjustments in Emerging Markets

Abstract

This paper examines how inflation influences household consumption behavior across emerging market economies. Drawing on a balanced panel dataset covering ten countries over the period 2000–2022, the study applies panel econometric techniques, including fixed-effects and random-effects estimations, to assess the sensitivity of household expenditure to price level fluctuations. The empirical findings reveal a robust and inverse association between inflation and household consumption, indicating that rising prices erode real income and dampen consumer spending. The results underscore the vulnerability of household demand to inflationary shocks and highlight the importance of coordinated monetary and fiscal policies aimed at preserving purchasing power and sustaining consumption-led growth in emerging economies.