The Effect of Macroeconomic Uncertainty on Household Spending
Olivier Coibion, Dimitris Georgarakos, Yuriy Gorodnichenko, Geoff Kenny, Michael Weber
American Economic Review · 2024 · Volume 114 · Issue 3
Abstract
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.
Keywords
Consumer Economics: Empirical Analysis, Criteria for Decision-Making under Risk and Uncertainty, Expectations, Speculations, Macroeconomics: Consumption, Saving, Wealth, Macroeconomics: Production, Household Finance: Household Saving, Borrowing, Debt, and Wealth
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