News and uncertainty about COVID-19: Survey evidence and short-run economic impact

Alexander Dietrich, Keith Kuester, Gernot Müller and Raphael Schoenle

No 4, ECONtribute Policy Brief Series from University of Bonn and University of Cologne, Germany

Abstract: We solicit household expectations about the economic costs of the COVID-19 pandemic. Households expect output to decrease by about 6 percent and inflation to increase by 5 percentage points in the 12 months following March 2020. We also document that the uncertainty about the overall effect is large, both at the level of individual respondents and in terms of the dispersion across respondents. To the extent that the economic fallout of COVID-19 has not fully materialized yet, but is still a) anticipated and b) uncertain it depresses private expenditure and pushes the natural rate of interest downward. In the second part of the paper we quantify this effect as we feed our the survey data in a standard business cycle model. We find that the natural rate drops by several percentage points and illustrate to what extent the short-run impact of COVID-19 depends on the response of monetary policy.

Keywords: COVID-19; Corona; Household expectations; Survey; News shocks; Uncertainty; Natural rate; Monetary Policy; Zero lower bound (search for similar items in EconPapers)
JEL-codes: C83 E43 E52 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2020-06
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

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https://www.econtribute.de/RePEc/ajk/ajkpbs/ECONtribute_PB_004_2020.pdf First version, 2020 (application/pdf)

Related works:
Journal Article: News and uncertainty about COVID-19: Survey evidence and short-run economic impact (2022)
Working Paper: News and uncertainty about COVID-19: Survey evidence and short-run economic impact (2021)
Working Paper: News and Uncertainty about COVID-19: Survey Evidence and Short-Run Economic Impact (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:ajk:ajkpbs:004

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