The Effect of Macroeconomic Uncertainty on Household Spending

By Olivier Coibion, Dimitris Georgarakos, Y. Gorodnichenko, G. Kenny, Michael Weber. Social Science Research Network, 2021

177 citations recorded by the source corpus.

We use randomized treatments that provide different types of information about the first and/or second moments of future economic growth to generate exogenous changes in the perceived macroeconomic uncertainty of treated households. The effects on their spending decisions relative to an untreated control group are measured in follow-up surveys. Our results indicate that, after taking into account first moments, higher macroeconomic uncertainty induces households to significantly and persistently reduce their total monthly spending in subsequent months. Changes in spending are broad based across spending categories and apply to larger durable good purchases as well. (JEL D12, D81, D84, E21, E23, G51)

Subfields: Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/83ed92cbbc32cac92a7abadd6ce33bd270d8412c

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In Economics and Econometrics

Citations in the corpus

News and uncertainty about COVID-19: Survey evidence and short-run economic impact (2020, background): “Our analysis also relates to work by Bloom (2009) and many others who have stressed the role of uncertainty as a potential source and amplification channel of the business cycle, a view recently supported by direct survey evidence ( Coibion et al., 2021 ).”
Designing Information Provision Experiments (2020, background): “…to study how households and firms form expectations about inflation (Armantier et al., 2016; Binder and Rodrigue, 2018; Cavallo et al., 2017; Coibion et al., 2021b, 2018, 2020d,e), house prices (Armona et al., 2019; Fuster et al., 2020), interest rates (Coibion et al., 2020a; Link et al.,…”