Macroeconomic disasters and forward-looking consumers: historical evidence and evidence from the Covid-19 pandemic

Arbeitspapier

Macroeconomic disasters (wars, pandemics, depressions) are characterized by drastic shifts and increased volatility of the aggregate consumption to income ratio. By standard intertemporal budget constraint logic, this ratio is linked to expectations of future income and consumption growth rates. We investigate whether these expectations suffice to explain the shifts in the consumption-income ratio that occur during disaster periods or whether, on the other hand, consumers become more forward-looking and therefore give more weight to these expectations during disaster times. Our theoretical framework implies that the predictive ability of the current consumption-income ratio for future income and consumption growth rates is higher during disaster episodes. We check this both for past disasters and the current Covid-19 pandemic through the estimation of panel data regressions for industrial economies using historical annual data (1870 - 2015) and recent quarterly data (1995Q1 - 2020Q4). Our estimations confirm that macroeconomic disasters, contrary to ordinary recessions, make consumers more forward-looking.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: Tinbergen Institute Discussion Paper ; No. TI 2021-030/VI

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Single Equation Models; Single Variables: Panel Data Models; Spatio-temporal Models ; Macroeconomics: Consumption; Saving; Wealth
• Thema: consumption ; saving ; macroeconomic disasters ; Covid-19 ; panel data

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Pozzi, Lorenzo ; Sadaba, Barbara
• Ereignis: Veröffentlichung
• (wer): Tinbergen Institute
• (wo): Amsterdam and Rotterdam
• (wann): 2021

Weitere Informationen

• Handle: http://hdl.handle.net/10419/237763
• Letzte Aktualisierung: 10.03.2025, 11:43 MEZ