Consumers' updating, policy shocks and public debt: An empirical assessment of state dependencies

Martin Geiger () and Marios Zachariadis
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Martin Geiger: Liechtenstein-Institut

No 69, Arbeitspapiere from Liechtenstein-Institut

Abstract: We assess the impact of fiscal and monetary policy shocks on US survey-based consumer expectations within states of low and high public debt. Following an unexpected increase in government spending, consumption intentions rise in the low-debt state and fall in the highdebt state. Overall, such a shock has adverse e ects on expectations in high-debt states. Similarly, contractionary monetary policy shocks induce pessimistic expectations in the highdebt state but not in the low-debt state. The estimated responses suggest that higher public debt fuels considerations regarding its repayment, giving rise to state dependencies in the updating of expectations in response to both fiscal and monetary policy shocks.

Keywords: expectations; rational inattention; Ricardian; fiscal theory of the price level (search for similar items in EconPapers)
JEL-codes: E31 E52 E62 E63 (search for similar items in EconPapers)
Pages: 86 pages
Date: 2021-03
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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https://www.liechtenstein-institut.li/download_file/1974/7154 First version, 2021 (application/pdf)

Related works:
Journal Article: CONSUMERS’ UPDATING, POLICY SHOCKS, AND PUBLIC DEBT: AN EMPIRICAL ASSESSMENT OF STATE DEPENDENCIES (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:lii:wpaper:69

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