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Discussion Paper
Coronavirus Outbreak Sends Consumer Expectations Plummeting
The New York Fed’s Center for Microeconomic Data released results today from its March 2020 Survey of Consumer Expectations (SCE), which provides information on consumers' economic expectations and behavior. In particular, the survey covers respondents’ views on how income, spending, inflation, credit access, and housing and labor market conditions will evolve over time. The March survey, which was fielded between March 2 and 31, records a substantial deterioration in financial and economic expectations, including sharp declines in household income and spending growth expectations. As ...
Report
Stimulus through Insurance: The Marginal Propensity to Repay Debt
Using detailed micro data, we document that households often use “stimulus” checks to pay down debt, especially those with low net wealth-to-income ratios. To rationalize these patterns, we introduce a borrowing price schedule into an otherwise standard incomplete markets model. Because interest rates rise with debt, borrowers have increasingly larger incentives to use an additional dollar to reduce debt service payments rather than consume. Using our calibrated model, we then study whether and how this marginal propensity to repay debt (MPRD) alters the aggregate implications of fiscal ...
Discussion Paper
What Are Consumers’ Inflation Expectations Telling Us Today?
The United States has experienced a considerable rise in inflation over the past year. In this post, we examine how consumers’ inflation expectations have responded to inflation during the pandemic period and to what extent this is different from the behavior of consumers’ expectations before the pandemic. We analyze two aspects of the response of consumers’ expectations to changing conditions. First, we examine by how much consumers revise their inflation expectations in response to inflation surprises. Second, we look at the pass-through of revisions in short-term inflation ...
Report
Understanding Consumer Demand for “Buy Now, Pay Later”
We estimate consumer preferences for “Buy Now, Pay Later” (BNPL) using a large-scale probabilistic stated choice survey experiment. Average willingness to pay (WTP) for the standard BNPL bundle is negative, but younger, lower-income, and less credit-worthy consumers exhibit higher demand. The share with positive estimated WTP closely matches actual BNPL take-up. Consumers strongly dislike interest charges and hard credit checks. Counterfactual simulations show that incorporating these features into the standard bundle lowers demand and worsens adverse selection toward riskier borrowers. ...
Working Paper
An anatomy of u.s. Personal bankruptcy under chapter 13
We build a structural model of Chapter 13 bankruptcy that captures salient features of personal bankruptcy under Chapter 13. We estimate our model using a novel data set we construct from bankruptcy court dockets recorded in Delaware between 2001 and 2002. Our estimation results highlight the importance of debtor?s choice of repayment plan length on Chapter 13 outcomes under the restrictions imposed by the bankruptcy law. We use the estimated model to conduct policy experiments to evaluate the impact of more stringent provisions of Chapter 13 that impose additional restrictions on the length ...
Discussion Paper
Recent Shifts Seen in Consumers’ Public Policy Expectations
In this post we examine changes in households’ beliefs following the release of the December 2024 SCE Public Policy Survey, finding large shifts in consumer expectations about future changes in fiscal policy. Households assign higher likelihoods to a variety of tax cuts and to reductions in a range of transfer programs, while they assign lower likelihoods to tax hikes and expansions in entitlement programs. We do not find these sharp changes translate into meaningful shifts in median households’ near-term expectations about the evolution of the overall economy, nor do they appear to have ...
Discussion Paper
New SCE Charts Include a Measure of Longer-Term Inflation Expectations
Today, the New York Fed introduces several new data series and interactive charts depicting findings from its Survey of Consumer Expectations (SCE). The SCE is a representative, internet-based monthly survey of a rotating panel of about 1,300 household heads in the United States. Since January 2014, we have been reporting findings from our monthly survey on U.S. households’ views on inflation, household income and spending growth, their expectations about the housing and labor market, and a range of other expectations about the economy and outcomes for their own household. In addition to ...
Report
Subjective Uncertainty and the Marginal Propensity to Consume
Earnings uncertainty is central to most heterogeneous-household models. Yet, there is little evidence on how subjective uncertainty, the uncertainty individuals actually perceive, is related to consumption behavior. Using unique data from the Survey of Consumer Expectations, we show that the marginal propensity to consume (MPC) is increasing and concave in individual–specific earnings growth uncertainty. In the workhorse consumption–savings model, augmented with risk heterogeneity, MPCs decline with earnings uncertainty, contrary to the empirical evidence. We pinpoint which mechanisms, ...
Report
Three Stylized Facts About Inflation Expectations During the 2021-23 Inflation Surge
We document three stylized facts about household inflation expectations that stood out during the 2021–23 inflation surge: i) a temporary dislocation in the term structure of expectations, ii) an earlier peak at longer horizons, and iii) a sharp increase in the share of households expecting deflation at medium and long horizons. We show that these stylized facts are consistent with households’ narratives attributing the inflation surge to temporary labor and supply disruptions. We also argue that they pose an empirical challenge to existing models of expectation formation. Implications ...
Discussion Paper
Not Just “Stimulus” Checks: The Marginal Propensity to Repay Debt
Households frequently use stimulus checks to pay down existing debt. In this post, we discuss the empirical evidence on this marginal propensity to repay debt (MPRD), and we present new findings using the Survey of Consumer Expectations. We find that households with low net wealth-to-income ratios were more prone to use transfers from the CARES Act of March 2020 to pay down debt. We then show that standard models of consumption-saving behavior can be made consistent with these empirical findings if borrowers’ interest rates rise with debt. Our model suggests that fiscal policy may face a ...