Discussion Paper Details

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Title: News and uncertainty about COVID-19: Survey evidence and short-run economic impact

Author(s): Alexander Dietrich, Keith Kuester, Gernot Müller and Raphael Schoenle

Publication Date: December 2021

Keyword(s): Consumer expectations, Large shock, monetary policy, survey and uncertainty

Programme Area(s): Monetary Economics and Fluctuations

Abstract: A tailor-made survey documents consumer perceptions of the U.S.~economy's response to a large shock: the advent of the COVID-19 pandemic. The survey ran at a daily frequency between March 2020 and July 2021. Consumer perceptions regarding output and inflation react rapidly. Uncertainty is pervasive. A business-cycle model calibrated to the consumer views provides an interpretation. The rise in household uncertainty amplifies the pandemic recession by a factor of three. Different perceptions about monetary policy can explain why consumers and professional forecasters agree on the recessionary impact, but have sharply divergent views about inflation.

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Bibliographic Reference

Dietrich, A, Kuester, K, Müller, G and Schoenle, R. 2021. 'News and uncertainty about COVID-19: Survey evidence and short-run economic impact'. London, Centre for Economic Policy Research.