Abstract:

Introduction Economic shocks, that is, events that cause a sudden loss of income for households, are common in low-income and middle-income countries (LMICs), yet their impact on mental health remains understudied. While such shocks may contribute to depression and anxiety, evidence remains limited, particularly in resource-poor settings where mental health disorders are underdiagnosed and undertreated. This study examines the causal impact of economic shocks on depression and anxiety in a low-income context.

Methods We used nationally representative panel data over two waves from Bangladesh, applying individual fixed effects to estimate the impact of economic shocks on mental health outcomes. Economic shocks were defined as adverse events negatively affecting income, assets or production. Depression and anxiety were assessed using the validated Patient Health Questionnaire-9 and Generalised Anxiety Disorder-7 scales.

Results In a two-round sample of 7090 observations, 16.3% (N=1155) experienced depression, 6.5% (N=459) experienced anxiety and 5.1% (N=361) experienced both depression and anxiety. Economic shocks significantly increased depression and anxiety. Individuals experiencing multiple types of shocks had nearly double the risk of reporting either mental health disorder compared with those facing a single shock. These impacts persisted for 6–12 months postshock. Adverse mental health effects were concentrated among individuals without coping mechanisms, such as use of savings, credit or support from friends and family, while those with access to such mechanisms showed no significant adverse outcomes. Education appeared protective, with individuals who had at least primary education exhibiting lower vulnerability to mental health issues in the face of shocks.

Conclusions Economic shocks have a substantial and lasting mental health impact, with compounding effects for those experiencing multiple shocks. Education and coping mechanisms may serve as a buffer against adverse outcomes. These findings highlight the need for targeted interventions to mitigate the mental health consequences of economic disruptions in LMICs.