Do gasoline price expectations affect household readiness to spend at the ZLB? Evidence from Michigan survey data

This paper examines how household gasoline price expectations influence readiness to spend on durable goods, with particular attention to periods when short-term interest rates are constrained by the zero lower bound (ZLB). Using microdata from the Michigan Survey of Consumers, we estimate ordered probit models across both normal and ZLB conditions. The results show that higher gasoline price expectations significantly reduce spending readiness during normal periods, while at the ZLB the estimated effects are smaller and statistically insignificant. We also explore potential mechanisms, including discretionary income, precautionary savings, uncertainty, and operational costs, and find that the influence of expectations is concentrated in normal interest-rate environments. Our results suggest that gasoline price expectations significantly constrain household spending in normal times, but lose traction at the zero lower bound, implying that the policy relevance of energy price shocks depends on the prevailing interest-rate environment.