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Inflation with Covid Consumption Baskets

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  • Alberto Cavallo

Abstract

The Covid-19 Pandemic has led to changes in consumer expenditure patterns that can introduce significant bias in the measurement of inflation. I use data collected from credit and debit transactions in the US to update the official basket weights and estimate the impact on the Consumer Price Index (CPI). I find that the Covid inflation rate is higher than the official CPI in the US, for both headline and core indices. I also find similar results with Covid baskets in 10 out of 16 additional countries. The difference is significant and growing over time, as social-distancing rules and behaviors are making consumers spend relatively more on food and other categories with rising inflation, and relatively less on transportation and other categories experiencing significant deflation.

Suggested Citation

  • Alberto Cavallo, 2020. "Inflation with Covid Consumption Baskets," NBER Working Papers 27352, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:27352
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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