Roy Van der Weide, Christoph Lakner, Elena Ianchovichina, 16 February 2018

Gauti Eggertsson, Ragnar Juelsrud, Ella Getz Wold, 31 January 2018

Economists disagree on the macroeconomic role of negative interest rates. This column describes how, due to an apparent zero lower bound on deposit rates, negative policy rates have so far had very limited impact on the deposit rates faced by households and firms, and this lower bound on the deposit rate seems to be causing a decline in pass-through to lending rates as well. Negative interest rates thus appear ineffective in stimulating aggregate demand.

Bruce Meyer, James Sullivan, 15 January 2018

Concerns about rising inequality inform important debates on some of our most significant policy issues, but the debate over inequality relies almost exclusively on income data. This column argues that consumption data show how changes in inequality in economic wellbeing are more nuanced than a simple story of rising dispersion throughout the distribution. In the bottom half of the distribution there is little evidence rising consumption inequality, and in the top half of the distribution the rise in consumption inequality has been much more modest than the rise in income inequality, particularly since 2000. 

Masayuki Morikawa, 21 October 2017

Studies predicting a substantial impact of the 2020 Tokyo Olympic games on the Japanese economy have tended to overlook substitution effects in spending as well as the characteristics of those who are expected to increase their spending. This column uses a survey of 10,000 consumers across Japan to examine the net impact on consumer spending. While the majority expect no significant change in their consumption expenditures, a greater share of respondents expect a net increase than a net decrease. In general, people in their 20s and 30s, high-income earners, those with higher educational attainment, and households with at least one pre-school child expect a net increase in consumption expenditures.

Donald R. Davis, Jonathan Dingel, Joan Monras, Eduardo Morales, 24 October 2017

Smart devices and online activity generate a stream of data describing human behaviour in great detail. Social scientists can tap such data to examine previously unexplored topics. This column uses online restaurant reviews to measure consumption segregation. In New York City, restaurant consumption is considerably more racially integrated than residences. A substantial share of consumption segregation is attributable to the fact that consumers are less likely to visit restaurants in neighbourhoods with demographics unlike their own.

Benjamin Faber, Thibault Fally, 02 August 2017

A recent literature has documented the impact of firm heterogeneity on workers’ earnings. This column assesses firm heterogeneity in the context of its impact on households’ cost of living. Rich and poor households source their consumption differently, and are therefore impacted differently by asymmetries in heterogeneous firms. An analysis suggests that moderate trade liberalisation could lead to a 1.5-2.5% lower cost-of-living inflation in retail consumption for the richest 20% of US households compared to the poorest 20%.

Peter Bofinger, Mathias Ries, 29 July 2017

There is a broad consensus that the global decline in real interest rates can be explained with a higher propensity to save, above all due to demographic reasons. This column argues that this view relies on a commodity theory of finance, which is inadequate for analysis of real world phenomena. In a monetary theory of finance, household saving does not release funds for investment, it simply redistributes existing funds. In addition, the column shows that at the global level, the gross household saving rate has declined since the 1980s, as well as net saving rates.

David Autor, 21 July 2017

How did trade with China disrupt production and consumption in the US? David Autor discusses what could have happened to consumer prices and the manufacturing sector. This video was recorded at the Institute for Fiscal Studies in June 2017. The full lecture can be watched here.

Christiane Baumeister, Lutz Kilian, 18 May 2017

The sluggish growth of the US economy after the 2014-2016 decline in the oil price surprised many economists. This column argues that it should have been expected. The modest stimulus to private consumption and non-oil business investment was largely offset by a large decline in investment by the oil sector. Growth was further slowed by a simultaneous global economic slowdown, reflected in lower US exports. 

Tim Besley, Avinash Dixit, 31 March 2017

Many scientists agree that the probability of a rare environmental disaster increases as the stock of greenhouse gases accumulate in the atmosphere. This column asks how much consumption current generations should be willing to sacrifice to reduce the risk of such a future catastrophe. If there were a way of immediately eliminating the risk of all future catastrophes, society should be willing to sacrifice 16% of its consumption in perpetuity to achieve this. A sacrifice of 5.8% of annual consumption could bring about a 30% reduction in emissions, in line with the reductions contemplated in agreements such as the Kyoto Protocol.

Rick van der Ploeg, 24 December 2016

Policy advice for countries managing oil and gas windfalls is typically to smooth consumption boosts by borrowing on international capital markets pre-windfall, repaying the debt and accumulating assets in a sovereign wealth fund during the windfall, and withdrawing from that fund when the windfall ends. This column outlines various reasons why this approach can be disastrous for developing countries, and also considers the best response to a commodity price crash.

John Muellbauer, 21 December 2016

The failure of the New Keynesian dynamic stochastic general equilibrium models to capture interactions of finance and the real economy has been widely recognised since the Global Crisis. This column argues that the flaws in these models stem from unrealistic micro-foundations for household behaviour and from wrongly assuming that aggregate behaviour mimics a fully informed ‘representative agent’. Rather than ‘one-size-fits-all’ monetary and macroprudential policy, institutional differences between countries imply major differences for monetary policy transmission and policy.

Olympia Bover, Jose Maria Casado, Sónia Costa, Philip Du Caju, Yvonne McCarthy, Eva Sierminska, Panagiota Tzamourani, Ernesto Villanueva, Tibor Zavadil, 08 November 2016

Household micro-data reveal striking differences in secured debt holdings across Eurozone countries. This column presents new evidence on the role of household characteristics and country institutions in accounting for the cross-country patterns observed. In countries with lengthier asset repossession periods, young or low-income households face higher borrowing costs, leading to a lower probability of holding mortgages.

Jean-Noël Barrot, Erik Loualiche, Matthew Plosser, Julien Sauvagnat, 21 October 2016

In the years preceding the Great Recession there was a dramatic rise in household debt in the US, and an increase in import competition triggered by the expansion of China and other low-wage countries. This column uses consumer credit data to argue that these phenomena are intimately linked. Household debt levels increased significantly in counties where US manufacturing jobs shifted overseas, and regional exposure to import competition explains 30% of the cross-regional variation in the growth in household debt.

Peter Bofinger, Philipp Scheuermeyer, 20 October 2016

The effect of income distribution on aggregate saving has important implications for aggregate demand and global current account imbalances.  Drawing on evidence from a panel of high-income OECD countries, this column documents a hump-shaped relationship between inequality and aggregate saving rates. It also shows that the relationship between inequality and saving depends on financial market conditions.

Larry Levin, Matthew S. Lewis, Frank Wolak, 13 October 2016

A consensus that the demand for gasoline is price inelastic means that policymakers have opted to disregard price instruments when addressing gasoline consumption and climate change. This column analyses daily citywide data on gasoline prices and consumption to show that demand for gasoline is in fact substantially more elastic than previously thought. This is a major argument in favour of the effectiveness of price-based mechanisms in reducing greenhouse gas emissions.

Giacomo De Giorgi, Anders Frederiksen, Luigi Pistaferri, 17 September 2016

Household consumption can be influenced by the consumption behaviour of peers. This column examines why this is the case, and considers some policy implications. The tendency for individuals to under-save (or over-borrow) in an attempt to ‘keep up with the Joneses’ appears to be driven by the average consumption of their peers, rather than by the consumption of conspicuous items. If tax policy fails to consider these peer effects, it risks wrongly estimating the effects of tax reforms that target certain groups.

David Cashin, Takashi Unayama, 18 June 2016

Japan’s prime minister recently announced that a planned 2% VAT increase would be postponed from 2017 to 2019. This column explores how Japanese household consumption adjusted to a VAT increase that was announced in 2013 and implemented in 2014. Household consumption fell by around 4% upon announcement and 1% upon implementation, suggesting that most of the negative impact of a VAT rate increase occurs at the time of the announcement. 

James Cloyne, Clodomiro Ferreira, Paolo Surico, 21 April 2016

Monetary policy has significantly heterogeneous effects on private consumption, which depend on the household's debt and balance sheet position. This column suggests that households with mortgage debt behave in a liquidity-constrained manner, while those without are far less sensitive to movements in interest rates. Though the direct channel of monetary transmission – i.e. the movement in interest cash flows – also affects the expenditure of mortgagors, most of the aggregate effect comes via the stimulus to the income of all housing tenure groups.

Orazio Attanasio, 23 October 2015

Angus Deaton of Princeton University has been awarded the 2015 Nobel Prize in Economic Sciences ‘for his analysis of consumption, poverty, and welfare’. This column outlines his key contributions.