Stuck in the Seventies: Gas Prices and Macroeconomic Expectations
19 Pages Posted: 26 Oct 2018 Last revised: 14 Dec 2018
Date Written: October 17, 2018
Using daily consumer survey data, we analyze the transmission of gas prices to consumer beliefs and expectations about the economy. We exploit the high frequency and geographic disaggregation of our dataset to facilitate identification. Consumer sentiment becomes more pessimistic with rising real gas prices. Through a series of additional heterogeneity exercises, we find the effects are consistent with models of selective attention and personal experience. Our results also provide an additional amplification mechanism for the macroeconomic effects of energy price shocks.
Keywords: Consumer sentiment, macroeconomic expectations, selective attention, gas prices, behavioral macroeconomics
JEL Classification: E21, E32, E71, D12, D83, D84
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