Are Consumers' Spending Decisions in Line With an Euler Equation?
Keyword(s):
Evaluating a new survey of German consumers, we test whether individual consumption spending decisions are formed according to an Euler equation model. We find that consumers are more likely to increase current spending if they plan to increase spending in the future and if they expect higher inflation. In the subsample of financially literate households, we find an additional negative effect of nominal interest rate expectations. The effects of macroeconomic expectations become stronger if consumers observed news on monetary policy or financial markets. These news effects are particularly pronounced for consumers who save and those with low inflation forecast accuracy.
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2021 ◽
Vol ahead-of-print
(ahead-of-print)
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Keyword(s):
2014 ◽
Vol 19
(7)
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pp. 1427-1475
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A Neowicksellian in a New Classical World: The Methodology of Michael Woodford's Interest and Prices
2006 ◽
Vol 28
(2)
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pp. 143-149
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2017 ◽
Vol 23
(5)
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pp. 1875-1894
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