Homeownership and Attention to Inflation: Evidence from Information Treatments / Jessica Piccolo, Yuriy Gorodnichenko.

Format:

Book

Author/Creator:

Piccolo, Jessica.

Contributor:

Gorodnichenko, Yuriy.

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w33595.

NBER working paper series no. w33595

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2025.

Summary:

Whose inflation expectations drive spending decisions? Using randomized information treatments on U.S. households, we show that the answer depends on homeownership status. Renters revise their inflation expectations strongly in response to new information but do not adjust durable purchases. Homeowners update their beliefs more modestly but significantly increase durable spending when they do. This negative covariance between belief updating and spending response implies that average estimates conflate groups with opposite behavior. We trace the asymmetry to differences both in attention to inflation and in the available margins of adjustment: homeowners act through durables, while renters, who are more likely to be liquidity constrained, increase nondurable spending in the short run. These findings have implications for the design of central bank communication, the measurement of expectation-spending elasticities, and the modeling of heterogeneous attention in HANK frameworks.

Notes:

March 2025.

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