Working Paper: NBER ID: w28625
Authors: Olivier Coibion; Dimitris Georgarakos; Yuriy Gorodnichenko; Geoff Kenny; Michael Weber
Abstract: 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 information 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 some households. The effects on their spending decisions relative to an untreated control group are measured in follow-up surveys. Higher macroeconomic uncertainty induces households to reduce their spending on non-durable goods and services in subsequent months as well as to engage in fewer purchases of larger items such as package holidays or luxury goods. Moreover, uncertainty reduces household propensity to invest in mutual funds. These results support the notion that macroeconomic uncertainty can impact household decisions and have large negative effects on economic outcomes.
Keywords: macroeconomic uncertainty; household spending; randomized control trials
JEL Codes: E21; E3; E4; E5
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| higher macroeconomic uncertainty (D89) | reduce household spending on nondurable goods and services (D12) |
| higher macroeconomic uncertainty (D89) | reduce purchases of larger items (D12) |
| higher macroeconomic uncertainty (D89) | reduce propensity to invest in mutual funds (G11) |
| higher macroeconomic uncertainty (D89) | reduced spending among individuals in riskier sectors (D14) |
| higher macroeconomic uncertainty (D89) | reduced spending among those with investments in volatile assets (D14) |