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Inflation Expectations and Readiness to Spend: Cross-Sectional Evidence

Year: 2015

Type: article

Abstract: There have been suggestions for monetary policy to engineer higher inflation expectations to stimulate spending. We examine the relationship between expected inflation and spending attitudes using the microdata from the Michigan Survey of Consumers. The impact of higher inflation expectations on the reported readiness to spend on durables is generally small, outside the zero lower bound, often statistically insignificant, and inside of it typically significantly negative. In our baseline specification, a one percentage point increase in expected inflation during the recent zero lower bound period reduces households' probability of having a positive attitude towards spending by about 0.5 percentage points. (JEL D12, D84, E21, E31, E52)

Source: American Economic Journal Economic Policy

DOI: 10.1257/pol.20130292

Authors: Rüdiger Bachmann, Tim O. Berg, Eric R. Sims

Institutions: RWTH Aachen University, Ifo Institute for Economic Research, University of Notre Dame, National Bureau of Economic Research

Language: English

Topic: Monetary Policy and Economic Impact

Subfield: General Economics, Econometrics and Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: green

OpenAlex ID: W2093418366

FWCI: 60.46

Cites: 34

Cited by: 323

Related to: 10