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Household Inflation Expectations and Consumer Spending: Evidence from Panel Data

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Abstract

Recent research offers mixed results concerning the relationship between inflation expectations and consumption, using qualitative measures of readiness to spend. We revisit this question using survey panel data of actual spending from the U.S. between 2009 and 2012 that also allows us to control for household heterogeneity. We find that durables spending increases with expected inflation only for selected types of households while nondurables spending does not respond to expected inflation. Moreover, spending decreases with expected unemployment. These results imply a limited stimulating effect of inflation expectations on aggregate consumption, which could be reversed if inflation and unemployment expectations move together.

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  • Mary A. Burke & Ali Ozdagli, 2021. "Household Inflation Expectations and Consumer Spending: Evidence from Panel Data," Working Papers 2110, Federal Reserve Bank of Dallas.
    • Handle: RePEc:fip:feddwp:92968
    DOI: 10.24149/wp2110
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    More about this item

    Keywords

    Inflation expectations; survey data; durable and nondurable goods consumption;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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