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Expectations, Infections, and Economic Activity

Author

Listed:
  • Martin S. 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 interrelated yet distinct effects of public policies and private behavior on the spread of the disease. We evaluate the model using a novel micro data set on consumption expenditures in Portugal. The estimated model accounts for the cross-sectional consumption response of individuals of different ages at a given time, as well as the time-series response of consumption of the young and old across the first three waves of Covid. Our model highlights the critical role of expectations in shaping how human behavior influences the dynamics of epidemics.

Suggested Citation

  • Martin S. Eichenbaum & Miguel Godinho de Matos & Francisco Lima & Sergio Rebelo & Mathias Trabandt, 2020. "Expectations, Infections, and Economic Activity," NBER Working Papers 27988, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:27988
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    Cited by:

    1. 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.
    2. 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.
    3. 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).
    4. 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.
    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. Claire Greene & Ellen A. Merry & Joanna Stavins, 2021. "Has COVID Changed Consumer Payment Behavior?," Working Papers 21-12, Federal Reserve Bank of Boston.
    7. 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.
    8. repec:ptu:bdpart:e202113 is not listed on IDEAS
    9. 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.
    10. 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.

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    More about this item

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth
    • I1 - Health, Education, and Welfare - - Health

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