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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 from the United States of actual spending from 2009 through 2012 that also allow us to control for household heterogeneity. We find that durables spending increases with inflation expectations only for certain types of households, while nondurables spending does not respond to inflation expectations. Moreover, spending decreases with an expected increase in unemployment. These results imply a limited stimulating effect of inflation expectations on aggregate consumption, which could be offset in part or in full if expectations for inflation and unemployment move in the same direction.

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  • Mary A. Burke & Ali Ozdagli, 2020. "Household Inflation Expectations and Consumer Spending: Evidence from Panel Data," Working Papers 20-15, Federal Reserve Bank of Boston.
  • Handle: RePEc:fip:fedbwp:89229
    DOI: 10.29412/bosfrb.wp.2020.15
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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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