The Effect of Macroeconomic Uncertainty on Household Spending

Olivier Coibion, Dimitris Georgarakos, Yuriy Gorodnichenko, Geoff Kenny and Michael Weber

No 14213, IZA Discussion Papers from Institute of Labor Economics (IZA)

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: surveys; household finance; household spending; uncertainty; randomized control trial (search for similar items in EconPapers)
JEL-codes: E3 E4 E5 (search for similar items in EconPapers)
Pages: 57 pages
Date: 2021-03
New Economics Papers: this item is included in nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (39)

Published - published in: American Economic Review, 2024, 114 (3), 645–677

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Related works:
Journal Article: The Effect of Macroeconomic Uncertainty on Household Spending (2024)
Working Paper: The Effect of Macroeconomic Uncertainty on Household Spending (2021)
Working Paper: The effect of macroeconomic uncertainty on household spending (2021)
Working Paper: The Effect of Macroeconomic Uncertainty on Household Spending (2021)
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