Abstract
To analyze the demand shock effect, we concentrated on the 2008 Financial Crisis, relying on the data from the European Bank for Reconstruction and Development’s “Life in Transition Survey” conducted in 2010. This survey offers detailed information on how households reacted two years after the crisis. Regression models were developed to analyze the measures that households took during the economic decline and their implications for consumption. Such measures entailed alterations in spending patterns, saving practices, and other mechanisms of survival. The empirical investigation of the paper gives an understanding of the effects of demand shock such as the 2008 Financial Crisis on households’ consumption behavior and their ability to cope with the shocks. The results show that Financial Crisis affect negatively the labor market, which had a negative impact on consumption. Moreover, we explored how government tried to help households, what they used, etc.