The Impact of Inflation on Household Consumption: An Econometric Analysis from Emerging Markets

Abstract

This study investigates the relationship between inflation and household consumption in emerging market economies. Using panel data collected from ten countries between 2000 and 2022, the analysis applies fixed-effects and random-effects models to examine how fluctuations in consumer prices influence household spending patterns. The findings reveal a statistically significant negative relationship between inflation and household consumption, indicating that rising inflation reduces real purchasing power and constrains consumer demand. The study highlights the broader economic implications of persistent inflationary pressures, particularly in emerging economies where households are more vulnerable to price instability. These findings offer important insights for policymakers in designing effective monetary and fiscal strategies aimed at stabilizing prices, protecting consumer welfare, and sustaining economic growth.