A major component of the 27 March CARES Act in the US was a one-time transfer to all qualifying adults of up to $1200, with $500 per additional child. Using a large-scale survey of US consumers, this column studies how these large transfers affected individuals’ consumption, saving and labour supply decisions. Most respondents report that they primarily saved or paid down debts with their transfers, with only about 15% reporting that they mostly spent it. On average, individuals report having spent or planning to spend only around 40% of the total transfer. The payments appear to have had no meaningful effect on labour-supply decisions from these transfer payments, except for 20% of the unemployed who report that the stimulus payment made them search harder for a job.Read More »
Articles by Coibion, Gorodnichenko, Weber
The COVID-19 pandemic has resulted in some of the largest monetary and fiscal policy responses around the world. This column uses a large-scale survey of US households during the pandemic to study how new information about the coronavirus and associated policy responses affect households’ expectations. It finds that such information treatments have little effect on both households’ economic beliefs and future spending plans. This result is a fundamental challenge to workhorse models used by macroeconomists in which the rapid and endogenous adjustment of household expectations is a key driver of macroeconomic outcomes.
Monetary and fiscal policies affect the economy (Romer and Romer 2004, 2010) but how they operate remains a point of contention. A common thread across many
The cost of the COVID-19 crisis: Lockdowns, macroeconomic expectations, and consumer spending
Business cycles are rarely a matter of life or death in advanced economies, but the COVID-19 crisis is forcing policymakers into painful trade-offs between saving lives and saving the economy. This column uses several waves of a customised survey to study the economic costs of US lockdowns in terms of spending, labour market outcomes, and macroeconomic expectations. It finds overall spending drops of more than 30%, unemployment expectations climbing more than 10%, inflation expectations falling, uncertainty rising, and plans to purchase large durables plummeting.
Baldwin and Weder di Mauro (2020) provide an excellent overview of the recent policyRead More »
The arrival of the Covid-19 virus in the US and the policy responses have led to unprecedented numbers of initial claims for unemployment since early 2020: over 16.5 million by 4 April 2020, with new claims arriving at a rate of 6-7 million per week. But concerns about state governments’ inability to process so many claims in such a short period, combined with the fact that many workers are ineligible for unemployment benefits, has led to concerns that total job losses are being understated by these numbers. Furthermore, because official labour market indicators compiled by the Bureau of Labor Statistics (BLS) take time to be released, the current state of the US labour market remains unclear.
Baldwin and Weder di Mauro (2020) provide an excellent overview of the recent
Monetary policy communications and their effects on household inflation expectations
“Since I’ve become a central banker, I’ve learned to mumble with great incoherence. If I seem unduly clear to you, you must have misunderstood what I said."Alan Greenspan, 22 September 1987 (quoted in Geraats 2007)
“[B]ecause monetary policy affects everyone, I want to start with a plain-English summary of how the economy is doing, what my colleagues and I at the Federal Reserve are trying to do, and why.”Jerome Powell, 13 June 2018 (transcript of press conference in Federal Reserve System 2018)
Central bank communications have changed a lot in the last 30 years, as illustrated by the statements above, both from chairmen of the Federal Reserve. Central bankers now announce their