Macroeconomic Expectations and Credit Card Spending
How do macroeconomic expectations affect consumer decisions? This paper reports results from a natural field experiment with 2,872 credit card customers from a large commercial bank to answer this question. Participants of the experiment first comp...
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| Online Access: | http://documents.worldbank.org/curated/en/856051611603146325/Macroeconomic-Expectations-and-Credit-Card-Spending http://hdl.handle.net/10986/35071 |
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okr-10986-350712022-09-20T00:09:50Z Macroeconomic Expectations and Credit Card Spending Galashin, Mikhail Kanz, Martin Perez-Truglia, Ricardo MACROECONOMIC EXPECTATION EXPECTATIONS EXCHANGE RATE INFLATION SPENDING CONSUMPTION CONSUMER CREDIT BORROWING DURABLES TRADABLES How do macroeconomic expectations affect consumer decisions? This paper reports results from a natural field experiment with 2,872 credit card customers from a large commercial bank to answer this question. Participants of the experiment first completed a survey that measured consumer expectations about future inflation and the nominal exchange rate. This survey was combined with an information-provision experiment that generated exogenous variation in respondents’ macroeconomic expectations. The survey and experimental data were then merged with detailed administrative data on participants’ credit card transactions and balances. The experiment was designed to test three standard predictions from models of intertemporal consumption choice: inflation expectations should affect spending on durables; exchange rate expectations should affect spending on tradables; and, holding constant the nominal interest rate, inflation expectations should affect borrowing. The analysis finds that the information provided to participants strongly affects subjective expectations. However, no significant effects are found on actual consumer behavior (as measured in administrative data) or self-reported consumption plans (as measured in survey data). The preferred interpretation is that consumers are not sophisticated enough to factor inflation and exchange rate expectations into their consumption decisions. The absence of a link between consumer expectations and behavior has potentially important implications for macroeconomic policies such as forward guidance. 2021-01-28T15:41:01Z 2021-01-28T15:41:01Z 2021-01 Working Paper http://documents.worldbank.org/curated/en/856051611603146325/Macroeconomic-Expectations-and-Credit-Card-Spending http://hdl.handle.net/10986/35071 English Policy Research Working Paper;No. 9524 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank World Bank, Washington, DC Publications & Research Publications & Research :: Policy Research Working Paper East Asia and Pacific Malaysia |
| repository_type |
Digital Repository |
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Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
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World Bank |
| language |
English |
| topic |
MACROECONOMIC EXPECTATION EXPECTATIONS EXCHANGE RATE INFLATION SPENDING CONSUMPTION CONSUMER CREDIT BORROWING DURABLES TRADABLES |
| spellingShingle |
MACROECONOMIC EXPECTATION EXPECTATIONS EXCHANGE RATE INFLATION SPENDING CONSUMPTION CONSUMER CREDIT BORROWING DURABLES TRADABLES Galashin, Mikhail Kanz, Martin Perez-Truglia, Ricardo Macroeconomic Expectations and Credit Card Spending |
| geographic_facet |
East Asia and Pacific Malaysia |
| relation |
Policy Research Working Paper;No. 9524 |
| description |
How do macroeconomic expectations affect
consumer decisions? This paper reports results from a
natural field experiment with 2,872 credit card customers
from a large commercial bank to answer this question.
Participants of the experiment first completed a survey
that measured consumer expectations about future inflation
and the nominal exchange rate. This survey was combined with
an information-provision experiment that generated exogenous
variation in respondents’ macroeconomic expectations. The
survey and experimental data were then merged with detailed
administrative data on participants’ credit card
transactions and balances. The experiment was designed to
test three standard predictions from models of intertemporal
consumption choice: inflation expectations should affect
spending on durables; exchange rate expectations should
affect spending on tradables; and, holding constant the
nominal interest rate, inflation expectations should affect
borrowing. The analysis finds that the information provided
to participants strongly affects subjective expectations.
However, no significant effects are found on actual consumer
behavior (as measured in administrative data) or
self-reported consumption plans (as measured in survey
data). The preferred interpretation is that consumers are
not sophisticated enough to factor inflation and exchange
rate expectations into their consumption decisions. The
absence of a link between consumer expectations and behavior
has potentially important implications for macroeconomic
policies such as forward guidance. |
| format |
Working Paper |
| author |
Galashin, Mikhail Kanz, Martin Perez-Truglia, Ricardo |
| author_facet |
Galashin, Mikhail Kanz, Martin Perez-Truglia, Ricardo |
| author_sort |
Galashin, Mikhail |
| title |
Macroeconomic Expectations and Credit Card Spending |
| title_short |
Macroeconomic Expectations and Credit Card Spending |
| title_full |
Macroeconomic Expectations and Credit Card Spending |
| title_fullStr |
Macroeconomic Expectations and Credit Card Spending |
| title_full_unstemmed |
Macroeconomic Expectations and Credit Card Spending |
| title_sort |
macroeconomic expectations and credit card spending |
| publisher |
World Bank, Washington, DC |
| publishDate |
2021 |
| url |
http://documents.worldbank.org/curated/en/856051611603146325/Macroeconomic-Expectations-and-Credit-Card-Spending http://hdl.handle.net/10986/35071 |
| _version_ |
1764482259007569920 |