Consumption and account balances in crises: Have we neglected cognitive load?

Arbeitspapier

The complexities of geopolitical events, financial and fiscal crises, and the ebb and flow of personal life circumstances can weigh heavily on individuals' minds as they make critical economic decisions. To investigate the impact of cognitive load on such decisions, we conducted an incentivized online experiment involving a representative sample of 2,000 French households.. The results revealed that exposure to a taxing and persistent cognitive load significantly reduced consumption, particularly for individuals under the threat of furlough, while simultaneously increasing their account balances, particularly for those not facing such employment uncertainty. These effects were not driven by supply constraints or a worsening of credit constraints. Instead, cognitive load primarily affected the optimality of the chosen policy rules and impaired the ability of the standard economic model to accurately predict consumption patterns, although this effect was less pronounced among college-educated subjects.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IMFS Working Paper Series ; No. 197

Classification and Topics

• Classification: Wirtschaft ; Intertemporal Household Choice; Life Cycle Models and Saving ; Micro-Based Behavioral Economics: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making‡
• Subject: consumption ; saving ; borrowing ; cognitive load ; online experiments ; RCT ; crises ; furlough

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Assenza, Tiziana ; Cardaci, Alberto ; Chaliasos, Michael
• Event: Veröffentlichung
• (who): Goethe University Frankfurt, Institute for Monetary and Financial Stability (IMFS)
• (where): Frankfurt a. M.
• (when): 2023

Further information

• Handle: http://hdl.handle.net/10419/281064
• Last update: 10.03.2025, 11:43 AM CET