The Effect of Inflation Uncertainty on Household Expectations and Spending
Using a new Canadian household survey, we examine how inflation expectations and un-certainty shape spending. Randomized information treatments provide the first moment of various inflation statistics, with or without second moments, generating variation in both expectations and uncertainty. All information types lower expectations and uncertainty. Communicating uncertainty does not shift expectation or uncertainty levels, but raises the probability households assign to inflation near the communicated ranges. In Nielsen IQ Homescan data, higher inflation uncertainty persistently reduces spending on both durables and non-durables over the year following treatment, while higher inflation expectations raise durable spending one month after treatment.
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Copy CitationOlena Kostyshyna and Luba Petersen, "The Effect of Inflation Uncertainty on Household Expectations and Spending," NBER Working Paper 32939 (2024), https://doi.org/10.3386/w32939.Download Citation
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