Olivier Coibion, Yuriy Gorodnichenko, Michael Weber, 19 March 2021

Households in advanced economies are quite uninformed about inflation. Does this mean that they ignore inflation their economic decisions? This column uses a randomised control trial, a large-scale survey, and spending data to show that the answer is ‘no’. When households change their inflation expectations, this causally alters their spending decisions. This suggests communication strategies that meaningfully impact household expectations can also be expected to affect their decisions. 

Christopher Carroll, Edmund S. Crawley, Jiri Slacalek, Matthew N. White, 14 October 2020

The 2020 US CARES Act aimed to bolster consumer spending. This column tests the effectiveness of the Act by modelling the spending and saving behaviour of households during the COVID-19 pandemic, differentiating between the employed, temporarily unemployed and persistently unemployed. In the case of a short-lived lockdown, it finds that the CARES Act should prompt a swift recovery in consumer spending. If a longer-lasting lockdown is imposed to combat a ‘second wave’ of the virus, an extension of enhanced unemployment benefits will likely be needed.

Asger Lau Andersen, Emil Toft Hansen, Niels Johannesen, Adam Sheridan, 15 May 2020

The COVID-19 pandemic has had drastic effects on consumer spending across the world. This column presents evidence based on bank account transaction data from Denmark showing that total card spending was reduced by 25% during the early phase of the crisis. The drop was mostly concentrated on goods and services whose supply is directly restricted by government interventions, suggesting a limited role for spillovers to non-restricted sectors through demand in the short term.

Dimitris K. Chronopoulos, Marcel Lukas, John O.S. Wilson, 06 May 2020

Since the first COVID-19 cases were reported in January 2020, the UK government has introduced successive public health measures, culminating in late March 2020 with enforced closures of non-essential businesses and social distancing. These measures are significantly affecting UK household incomes and expenditures. This column exploits a large anonymised transaction-level dataset covering Great Britain to examine real-time consumer spending responses to the COVID-19 pandemic and related public policy measures. While there are differences by age, gender, and income level, overall consumer spending declined as the government lockdown becames imminent and has continued to decline since.

Philip Bunn, May Rostom, 12 January 2015

A number of US studies have found a link between high pre-crisis debt and weak consumption after the recent financial crisis. This column investigates the relationship between household debt and consumption in the UK. Spending cuts associated with debt are estimated to have reduced the level of aggregate private consumption by around 2% after 2007, unwinding the faster growth in spending by highly indebted households, relative to other households, before the financial crisis.

Jonathan Parker, 16 January 2009

Jonathan Parker of Northwestern University talks to Romesh Vaitilingam about the effectiveness of fiscal stimulus measures, beginning with his research on the impact of the US income tax rebates of 2001 and 2008 on household spending. The interview was recorded at the American Economic Association meetings in San Francisco in January 2009.


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