The Expected, Perceived, and Realized Inflation of U.S. Households before and during the COVID19 Pandemic

61 Pages Posted: 21 Jan 2022

See all articles by Michael Weber

Michael Weber

University of Chicago - Finance; National Bureau of Economic Research (NBER)

Yuriy Gorodnichenko

University of California, Berkeley - Department of Economics; National Bureau of Economic Research (NBER); IZA Institute of Labor Economics

Olivier Coibion

University of Texas at Austin

Multiple version iconThere are 3 versions of this paper

Date Written: January 20, 2022

Abstract

As the pandemic spread across the U.S., disagreement among U.S. households about inflation expectations surged along with the mean perceived and expected level of inflation. Simultaneously, the inflation experienced by households became more dispersed. Using matched micro data on spending of households and their macroeconomic expectations, we study the link between the inflation experienced by households in their daily shopping and their perceived and expected levels of inflation both before and during the pandemic. In normal times, realized inflation barely differs across observable dimensions but low income, low education, and Black households experienced a larger increase in realized inflation than other households did. Dispersion in realized and perceived inflation explains a large share of the rise in dispersion in inflation expectations.

JEL Classification: E2,E3

Suggested Citation

Weber, Michael and Gorodnichenko, Yuriy and Coibion, Olivier, The Expected, Perceived, and Realized Inflation of U.S. Households before and during the COVID19 Pandemic (January 20, 2022). University of Chicago, Becker Friedman Institute for Economics Working Paper No. 2022-09, Available at SSRN: https://ssrn.com/abstract=4013836 or http://dx.doi.org/10.2139/ssrn.4013836

Michael Weber (Contact Author)

University of Chicago - Finance ( email )

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National Bureau of Economic Research (NBER)

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Yuriy Gorodnichenko

University of California, Berkeley - Department of Economics ( email )

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National Bureau of Economic Research (NBER)

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IZA Institute of Labor Economics

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Olivier Coibion

University of Texas at Austin ( email )

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