Research / BFI Working PaperSep 01, 2022

The Effect of Macroeconomic Uncertainty on Household Spending

Olivier Coibion, Dimitris Georgarakos, Yuriy Gorodnichenko, Geoff Kenny, Michael Weber

Using a new survey of European households, we study how exogenous variation in the macroeconomic uncertainty perceived by households affects their spending decisions. We use randomized treatments that provide different types of information about the first and/or second moments of future economic growth to generate exogenous changes in the perceived macroeconomic uncertainty of treated households. The effects on their spending decisions relative to an untreated control group are measured in follow-up surveys. Our results indicate that, after taking into account first moments, higher macroeconomic uncertainty induces households to significantly and persistently reduce their total monthly spending in subsequent months. Changes in spending are broad-based across spending categories and apply to larger durable good purchases as well. These results support the notion that macroeconomic uncertainty can impact household decisions and have large negative effects on economic outcomes.

More Research From These Scholars

BFI Working Paper Nov 17, 2019

Estimating the Anomaly Base Rate

Alex Chinco, Andreas Neuhierl, Michael Weber
Topics:  Uncategorized
BFI Working Paper Oct 15, 2020

Effective Policy Communication: Targets versus Instruments

Francesco D’Acunto, Daniel Hoang, Maritta Paloviita, Michael Weber
Topics:  Monetary Policy
BFI Working Paper Jan 20, 2022

The Expected, Perceived, and Realized Inflation of U.S. Households before and during the COVID19 Pandemic

Michael Weber, Yuriy Gorodnichenko, Olivier Coibion
Topics:  COVID-19, Monetary Policy