Changes in real income of households in the Czech Republic due to the Russian invasion of Ukraine

Abstract

The objective of the paper was to assess the impact of the invasion of Ukraine by the Russian Federation on real household income in the Czech Republic. The research methods used in the study include content analysis, seasonal modification of SARIMA, and discounting method, specifically NPV. Data were collected from publicly available sources of the Czech Statistical Office. Based on a content analysis of the macroeconomic indicators under study, inflation and gross monthly household income were selected to examine further development of real household income in the Czech Republic. Based on historical data, the SARIMA model made statistically relevant forecasts of the selected variables for the "pre-war" year 2022. Comparing real and forecast data, it was confirmed that the Russian invasion of Ukraine (from 24th February 2022 onwards) has shown how vulnerable the European financial system is to external shocks, which can be observed in significant inflationary changes. The ability of the SARIMA model to handle a larger range of data and accurately determined seasonality was demonstrated in forecasting the development of real household income. The identified economic consequences of deviations of the real and forecast figures in the "pre-war" period showed new realities in turbulent economic conditions. In order to further expand the research, combining the applied method with other analytical tools can be recommended. Moreover, it is advisable to include new relevant variables in the model. This would allow understanding better and forecasting the development of real household income in the context of current economic events.