American Economic Journal:
Economic Policy
ISSN 1945-7731 (Print) | ISSN 1945-774X (Online)
Inflation Expectations and Readiness to Spend: Cross-Sectional Evidence
American Economic Journal: Economic Policy
vol. 7,
no. 1, February 2015
(pp. 1–35)
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)Citation
Bachmann, Rüdiger, Tim O. Berg, and Eric R. Sims. 2015. "Inflation Expectations and Readiness to Spend: Cross-Sectional Evidence." American Economic Journal: Economic Policy, 7 (1): 1–35. DOI: 10.1257/pol.20130292Additional Materials
JEL Classification
- D12 Consumer Economics: Empirical Analysis
- D84 Expectations; Speculations
- E21 Macroeconomics: Consumption; Saving; Wealth
- E31 Price Level; Inflation; Deflation
- E52 Monetary Policy
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