Survival spending: How climate shocks and conflict shape household consumption in Somalia

Private consumption remains a central yet underexplored outcome in the intersection of climate change, conflict, and macroeconomic dynamics especially in contexts marked by persistent volatility. Somalia presents a compelling case, where prolonged exposure to climate shocks, economic instability, and political conflict deeply influence household behavior. This study investigates the effect of temperature, drought (captured via the Standardized Precipitation Index), CO2 emissions, inflation, conflict, and GDP per capita on private consumption in Somalia over 1970–2023. Using the Autoregressive Distributed Lag (ARDL) model and Granger causality analysis, the research uncovers nuanced dynamics between explanatory variables and consumption. Cointegration is confirmed (bounds F = 4.81), with a stable adjustment back to equilibrium (ECM = −0.066), implying ∼6.6 % correction per year. Results show that temperature and CO2 emissions are positively associated with consumption in the long run (≈+7.41 and + 1.81, respectively), while inflation erodes it (≈−0.75). Drought exerts a short-run negative effect (≈−0.06) but turns positive over time (≈+1.12), reflecting forced adjustments such as asset sales, displacement, and aid dependency. Conflict, too, exhibits a counterintuitive long-run positive association (≈+1.34), driven not by welfare gains but by shifts in spending patterns, remittance inflows, and humanitarian support. By integrating climatic, socio-political, and economic variables in a long-horizon empirical framework, this study provides novel insights into the complex and often paradoxical ways stressors shape household-level consumption. The findings inform targeted policies that reflect local realities while supporting economic resilience in highly exposed contexts like Somalia.