Shocks, financial constraints and households’ consumption amid the great recession

Overall, there is now considerable evidence that financial constraints are at the root of lack consumption smoothing during Great Recession. We push this forward and show in presence credit constraints, a job loss leads to larger drops households? consumption. build set testable hypotheses from our theoretical model employ microdata taken second round Life Transition Survey (LiTS II) (European Bank for Reconstruction Development 2010). specifically assess role explaining coping strategies after crisis shocks. Economic hardship more likely be observed if households experience difficulties meeting outstanding debt obligations or obtaining new lines because constraints. The impact wage shocks on much attenuated, by around half, when we control sample selection bias accessing formal markets. In context increasing impoverishment across Europe, paper shows careful analysis main determinants economic crucial formulate targeted measures regional local level.