Working Paper: CEPR ID: DP16766
Authors: Alexander Dietrich; Keith Kuester; Gernot Müller; Raphael Schoenle
Abstract: A tailor-made survey documents consumer perceptions of the U.S.~economy’s response to a large shock: the advent of the COVID-19 pandemic. The survey ran at a daily frequency between March 2020 and July 2021. Consumer perceptions regarding output and inflation react rapidly. Uncertainty is pervasive. A business-cycle model calibrated to the consumer views provides an interpretation. The rise in household uncertainty amplifies the pandemic recession by a factor of three. Different perceptions about monetary policy can explain why consumers and professional forecasters agree on the recessionary impact, but have sharply divergent views about inflation.
Keywords: consumer expectations; survey; large shock; uncertainty; monetary policy
JEL Codes: C83; E32; E52
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| COVID-19 pandemic (H12) | consumer expectations regarding output and inflation (E31) |
| increased uncertainty (D89) | severity of the recession (F44) |
| consumer uncertainty (D80) | fall in GDP during the pandemic (E20) |
| perceptions of monetary policy (E52) | inflation expectations (E31) |
| consumer expectations (D84) | economic outcomes (F61) |