Spending Less After (Seemingly) Bad News / Mark Garmaise, Yaron Levi, Hanno Lustig.

Format:

Book

Author/Creator:

Garmaise, Mark.

Contributor:

National Bureau of Economic Research.

Levi, Yaron.

Lustig, Hanno.

Series:

Working Paper Series (National Bureau of Economic Research) no. w27010.

NBER working paper series no. w27010

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Spending Less After

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2020.

Summary:

Using high-frequency spending data, we show that household consumption displays excess sensitivity to salient macro-economic news, even when the news is not real. When the announced local unemployment rate reaches a 12-month maximum, local news coverage of unemployment increases and local consumers reduce their discretionary spending by 2% relative to consumers in areas with the same macro-economic fundamentals. The consumption of low-income households displays greater excess sensitivity to salience. The decrease in spending is not reversed in subsequent months; instead, negative news persistently reduces future spending for two to four months. Households in treated areas act as if they are more financially constrained than those in untreated areas with the same fundamentals.

Notes:

Print version record

April 2020.