The Impact of COVID-19 Lockdowns on Household Income, Consumption and Expectations: Evidence from High-frequency Data in Indonesia

Abstract

We investigate the causal impact of Covid-19 lockdowns on household income, income expectations, consumption of durable goods and budget allocation in Indonesia using high-frequency data from the monthly Bank Indonesia Consumer Survey, which had more than 176,000 respondents. We find that Covid-19 lockdowns had a large and significant adverse impact on household income, expectations and consumption. We also find that households tried to smooth consumption in the face of declining income, resulting in a significant increase in the budget allocated to consumption while reducing the shares of debt repayments and savings. The impact of lockdowns on households was also heterogeneous by expenditure levels, regions and levels of education. These findings have important implications for policy intended to cushion the pandemic’s impact on households and ensure a more inclusive recovery.