2026-07-01http://hdl.handle.net/123456789/414043This paper examines the impact of the recent banking crises in Europe and Central Asia with an emphasis on household income and consumption patterns. The analysis is based on the 2010 wave of the Life in Transition Survey, which covers 12,704 households in eleven countries that experienced a banking crisis between 2008 and 2011. It finds that households in middle-income crisis countries are more than twice as likely to be hit by an income shock as households in high-income crisis countries. The labor market channel is the predominant source of income shocks, with wage reductions more widespread than job-losses. In reaction to income shocks, households reallocate spending from non-essential goods to staple foods. Reductions in staple-food consumption are, however, prevalent among low-income households. The paper examines potential crisis mitigators and finds that at the macro level a flexible monetary regime is associated with fewer cutbacks in household consumption. At the meso level, it finds no evidence that foreign bank ownership amplified the transmission of banking crises to households in Europe. With respect to micro-level mitigators, the analysis finds that diversified income sources as well as stocks of non-financial and financial assets help households to cushion income shocks. Access to informal and formal credit also mitigates the impact of income shocks on household consumption, with the former especially important in middle-income countries.application/pdftext/plainCC BY 3.0 IGOhttp://creativecommons.org/licenses/by/3.0/igoWorld BankAccess to Bankaccess to bankingaccess to banking servicesaccess to creditaccess to financeaccess to formal creditagricultural activitiesagricultural productsagricultural sectoragricultural sectorsamount of loanasset accumulationbalance sheetsbalance-sheetBank accountbank branchesbank claimsbank creditbank creditorsbank depositsbank lendingbank nationalizationsBank PolicyBanking Crisesbanking crisisbanking relationshipsbanking sectorbanking systembanksbondholdersBorrowingbudget constraintscapital marketcapital market fundingcentral bankcommoditiesconsumer creditconsumer loansconsumption smoothingcountry fixed effectscredit accesscredit cardcredit crunchcredit crunchesCredit growthCredit lossescredit marketcredit rationingcredit sourcescreditorcreditorscrisis countriesCross-border bankingcurrency crisescurrency crisiscurrency devaluationdebtdebt accumulationdebt crisesdebt crisisDebt Overhangdebt-servicedepositdeposit accountsdeposit fundingDeposit Insurancedeposit money banksdepositordepositorsdepositsdevaluationdeveloping countriesdeveloping economiesdistribution of incomediversificationdiversified incomedomestic bankingdomestic banksdomestic creditdomestic currencydummy variabledurabledurable goodsEarningseconomic activitieseconomic activityeconomic criseseconomic crisiseconomic developmenteconomic difficultieseconomic growthEconomic Policyemerging economiesemerging marketsenrollmentequilibrium creditexchange rateexchange ratesexpansionary monetary policyexpenditureexpendituresexposureextension of creditfamily businessfamily businessesFederal Reservefinancial assetsfinancial crisesfinancial crisisFinancial globalizationfinancial institutionfinancial institutionsfinancial liabilitiesFinancial Marketfinancial marketsfinancial sectorfinancial sector developmentfinancial servicesFinancial ShocksFinancial Studiesfiscal policyfloating exchange ratesforeign bankforeign banksforeign currencyforeign currency debtforeign currency loansformal bankingformal creditgovernment budgetgovernment debthousehold accesshousehold debthousehold incomeHousehold IncomesHousehold WelfareHouseholdsincome groupincome groupsincome levelincome levelsincome shockincome shocksinflationinformal creditinstallmentsinstitutional environmentinstrumentInternational BankInternational bank lendingInternational Economicsinvestment purposeslabor marketlabor marketslegal environmentliquid financial assetsliquidationsliquidityliquidity assistanceliquidity constraintsloanloan applicationslocal currencylow-income countriesmacroeconomic policymarket disciplinemarket shareMicrofinancemiddle-income countriesmiddle-income economiesMonetary Fundmonetary policyMortgageMortgage lendingmortgagesMultinationalMultinational banksnegative income shocknegative shocksNon Performing LoansNPLoutputoutput lossownership structurepayment servicesphysical accesspolicy responsepolicy responsesportfolioprivate sector creditprovision of creditprovision of mortgagePublic DebtPublic Policypublic spendingreal economic activityRecessionremittanceremittancesRisk Managementrisky loanssafety netsafety netssavingssavings banksself-employmentsocial safety netsocial safety netssocial securitysource of incomesovereign debtstockstaxterm Credittrade credittreasuryunemploymentunionurban areasuse of bank creditwealth effectworking capitalWorld Development Indicators