How do Consumers View Future Government Debt? A Primer on Debt-Growth Expectations

RePEc Short ID: pdo535
ORCID iD: 0000-0003-4096-5897

Luduvice, Andre; Walker, Christopher J.

doi:10.26509/frbc-ec-202616

Journal Article

How do Consumers View Future Government Debt? A Primer on Debt-Growth Expectations

Abstract: We analyze consumers’ expectations for growth in government debt before and after the COVID-19 pandemic, its breakdown by different income groups, and its relation to inflation expectations. We find that debt-growth expectations rose immediately during the pandemic recession and started to return to their prepandemic levels at the end of 2024. We also observe that consumers in the bottom 40 percent of the household-income distribution have higher debt-growth expectations than their counterparts in the middle 40 percent and top 20 percent of this distribution. A regression analysis indicates that government debt-growth expectations are positively correlated with inflation expectations in the post-pandemic recession period.

https://doi.org/10.26509/frbc-ec-202616