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Macroeconomic uncertainty shocks and households’ consumption choice

Eun-Young Nam, Kiryoung Lee and Yoontae Jeon

Journal of Macroeconomics, 2021, vol. 68, issue C

Abstract: Exploiting U.S. households’ consumption survey data, we study whether recently developed indices of macroeconomic uncertainty (e.g., Jurado et al., 2015; Baker et al., 2016; Bekaert et al., 2019) affect household consumption choices. We find that positive shocks to financial, real, and macroeconomic uncertainty indices by Jurado et al. (2015), as well as S&P 500 implied volatility (VIX) significantly depress U.S. households’ consumption. We also find that households that are more uncertain about their individual future consumption react to economic uncertainty more sensitively. The real and macro uncertainty indices by Jurado et al. (2015) also have a long-lasting effect on consumption choices, consistent with the habit formation model.

Keywords: Economic uncertainty index, Consumption expenditure survey, Household consumption, consumption uncertainty (search for similar items in EconPapers)
JEL-codes: D14 D80 E21 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1016/j.jmacro.2021.103306

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