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Expectations, Infections, and Economic Activity

Author

Listed:
  • Martin Eichenbaum
  • Miguel Godinho de Matos
  • Francisco Lima
  • Sergio Rebelo
  • Mathias Trabandt

Abstract

This paper develops a quantitative theory of how people weigh the risks of infections against the benefits of engaging in social interactions that contribute to the spread of infectious diseases. Our framework takes into account the effects of public policies and private behavior on the spread of the disease. We evaluate the model using a novel micro panel dataset on consumption expenditures of young and older people across the first three waves of COVID-19 in Portugal. Our model highlights the critical role of expectations in shaping how human behavior influences the dynamics of epidemics.

Suggested Citation

  • Martin Eichenbaum & Miguel Godinho de Matos & Francisco Lima & Sergio Rebelo & Mathias Trabandt, 2024. "Expectations, Infections, and Economic Activity," Journal of Political Economy, University of Chicago Press, vol. 132(8), pages 2571-2611.
    • Handle: RePEc:ucp:jpolec:doi:10.1086/729449
    DOI: 10.1086/729449
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    Cited by:

    1. Giovanni Immordino & Tullio Jappelli & Tommaso Oliviero & Alberto Zazzaro, 2022. "Fear of COVID‐19 contagion and consumption: Evidence from a survey of Italian households," Health Economics, John Wiley & Sons, Ltd., vol. 31(3), pages 496-507, March.
    2. Albuquerque, Bruno & Green, Georgina, 2023. "Financial concerns and the marginal propensity to consume in COVID times: Evidence from UK survey data," Journal of Macroeconomics, Elsevier, vol. 78(C).
    3. Deiana, Claudio & Geraci, Andrea & Mastrobuoni, Giovanni & Weidenholzer, Simon, 2025. "Running the risk: Immunity and mobility in response to a pandemic," European Economic Review, Elsevier, vol. 177(C).
    4. De Schryder, Selien & Koutounidis, Nikolaos & Schoors, Koen & Weytjens, Johannes, 2025. "Assessing the heterogeneous impact of COVID-19 on consumption using bank transactions," Journal of Macroeconomics, Elsevier, vol. 84(C).
    5. Gunther Schnabl & Tim Florian Sepp, 2021. "Inflationsziel und Inflationsmessung in der Eurozone im Wandel [Inflation Targeting and Inflation Measurement in the Euro Area in Transition]," Wirtschaftsdienst, Springer;ZBW - Leibniz Information Centre for Economics, vol. 101(8), pages 615-620, August.
    6. Byungjin Park & Joonmo Cho, 2023. "COVID-19 and Age Disparity in Credit Card Expenditures in Korea: Implications on the Government Relief Fund," SAGE Open, , vol. 13(4), pages 21582440231, December.
    7. Claire Greene & Ellen A. Merry & Joanna Stavins, 2021. "Has COVID Changed Consumer Payment Behavior?," Working Papers 21-12, Federal Reserve Bank of Boston.
    8. Bruno P. Carvalho & Susana Peralta & João Pereira dos Santos, 2022. "Regional and sectorial impacts of the Covid‐19 crisis: Evidence from electronic payments," Journal of Regional Science, Wiley Blackwell, vol. 62(3), pages 757-798, June.
    9. repec:ptu:bdpart:e202113 is not listed on IDEAS
    10. Timo Boppart & Karl Harmenberg & John Hassler & Per Krusell & Jonna Olsson, 2025. "Integrated epi‐econ assessment: Quantitative theory," Quantitative Economics, Econometric Society, vol. 16(1), pages 89-131, January.
    11. Martin S Eichenbaum & Sergio Rebelo & Mathias Trabandt, 2021. "The Macroeconomics of Epidemics [Economic activity and the spread of viral diseases: Evidence from high frequency data]," The Review of Financial Studies, Society for Financial Studies, vol. 34(11), pages 5149-5187.
    12. Bachmann, Rüdiger & Bayer, Christian & Kornejew, Martin, 2025. "Pandemic consumption," Journal of Economic Dynamics and Control, Elsevier, vol. 180(C).
    13. Almut Balleer & Sebastian Link & Manuel Menkhoff & Peter Zorn, 2024. "Demand or Supply? Price Adjustment Heterogeneity during the COVID-19 Pandemic," International Journal of Central Banking, International Journal of Central Banking, vol. 20(1), pages 93-157, February.
    14. Antonio José Carpio-de los Pinos & María de las Nieves González-García & Ligia Cristina Pentelhão & J. Santos Baptista, 2021. "Zero-Risk Interpretation in the Level of Preventive Action Method Implementation for Health and Safety in Construction Sites," IJERPH, MDPI, vol. 18(7), pages 1-23, March.
    15. Liu, An-Chi & Lien, Yung-Chih & Li, Yang, 2025. "An empirical investigation of ESG dimensions and bank performance: Evidence from the COVID-19 crisis," Pacific-Basin Finance Journal, Elsevier, vol. 93(C).
    16. Emiliozzi, Simone & Rondinelli, Concetta & Villa, Stefania, 2025. "Unveiling consumption patterns during COVID-19: Insights from credit cards," Economic Modelling, Elsevier, vol. 147(C).
    17. Martin S. Eichenbaum & Sergio Rebelo & Mathias Trabandt, 2022. "Inequality in Life and Death," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 70(1), pages 68-104, March.

    More about this item

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • I10 - Health, Education, and Welfare - - Health - - - General

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