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The Effect of Macroeconomic Uncertainty on Household Spending: Olivier Coibion (UT Austin)

26 May 2021, 3:00 pm–4:00 pm

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Olivier Coibion from the University of Texas, Austin will speak at this event as part of the Macro Seminar Series.

Event Information

Open to

All

Organiser

Wei Cui

The Effect of Macroeconomic Uncertainty on Household Spending 

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 nondurable
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.

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