The Spatial Analysis of the Impact of Economic Uncertainty on Household Consumption in Taiwan

ABSTRACT This study examines the effects of economic uncertainty, savings behavior, and the COVID‐19 pandemic on household consumption in Taiwan using county‐level panel data from 2009 to 2022. By employing traditional panel models and Spatial Durbin Models, I assess both direct and spatial effects on consumption patterns. The results indicate that economic uncertainty suppresses discretionary spending, such as clothing, while essential expenditures, such as food, remain stable due to consumption rigidities. The analysis finds that precautionary savings negatively affect food expenditures, reflecting households' prioritization of financial security. The COVID‐19 pandemic initially increased essential spending, such as food, but prolonged uncertainty dampened non‐essential expenditures, including leisure activities. Spatial interdependencies highlight significant regional spillovers, with urbanization and population density influencing consumption behavior. The findings underscore the need for targeted policies, including fiscal support, regional development, and social safety nets, to mitigate economic uncertainty and enhance consumption resilience during economic instability.