Inflation and the consumption of essential goods in Ecuador: an econometric analysis of demand during the 2018–2023 period
Keywords:
inflation, price elasticity, consumption, Ecuadorian economy, essential goodsAbstract
Inflation is a macroeconomic phenomenon that directly affects the consumption of essential goods in Ecuador, particularly in contexts of high price volatility. This study aims to evaluate how inflation impacted the consumption of basic necessities between 2018 and 2023. An econometric analysis based on price elasticity of demand models was employed, utilizing data from INEC regarding the consumption of food, fuel, and basic services. The results revealed that food was the most sensitive to inflation, with a price elasticity of -0.45, while fuel and basic services showed lower sensitivities (-0.30 and -0.15, respectively). Despite high inflation, the consumption of basic services remained relatively stable, a trend attributable to subsidies and public policies that cushioned the impact of prices. During the COVID-19 pandemic (2020–2021), an increase in price sensitivity was observed, particularly regarding food and fuel. These findings highlight the importance of designing economic policies that minimize adverse effects on the most vulnerable households, given the significant impact of inflation on the consumption of essential goods. This study offers a quantitative perspective on the relationship between inflation and demand in Ecuador and provides useful information for future economic policy decisions.
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Copyright (c) 2023 Haydee Yulan-Negrete (Autor/a)
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